When I bought my '87 about 18 months ago I was curious about the temp gauge readings, they seemed high to me. I replaced the radiator (it was leaking slightly) and I had some engine work done, a new water pump and a new vac pump installed and new belt and idler pulley. It still ran the same temps. Then along came a thread on the subject and after the discussion died down I felt assurance that the car was normal in that respect. I still wish it ran as cool as my iron head turbo diesels though.

Another thing you may want to do is replace the fan thermo switch, the three terminal one. As busybenz raised earlier there is a lower temp one available from the later series diesels. gsxr recommends this "up-grade" (see below).
The reason I suggest replacing this switch, even if with the original type, is because they tend to fail after a few years because they carry the entire fan current (about 12A at least and more when they start). There was an idea which proposed adding a small relay to take the high current load off this switch, that is something I'd like to do when I get time.

quoting gsxr: 3) The electric fan high speed is only triggered by the 3-prong sender up at the water outlet on the cylinder head, near the upper radiator hose. The 603.960 switch is blue and rated 128/105, and costs about twice as much as the 603.961 switch (which is gray and rated 120/105). If you replace it, get the cheaper switch, which will also engage the AC safety shutoff at 120C instead of 128C, which IMO is ridiculously high.

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'95 E320 Wagon my favorite road car. '99 E300D wolf in sheeps body, '87 300D Sportline suspension, '79 300TD w/ 617.952 engine at 367,750 and counting!