I have the same car, no problems with erratic temperature. I would replace the thermostat just as cheap insurance, it is cheap, and their lifespan is not always predictable.

I also just recently replaced one of the aux cooling fans, not a pleasant experience, but my tech said it is an important part of the cooling chain, and not to be ignored on this engine. If both are not working consistently, maybe the swings correspond to a fan going in and out. Are both of yours operating? Mine was spinning, but at marginal speed. Check the connectors before you buy the fan($$$).

I might ignore a guage that twitches, but not one that swings up and down. I don't think you have a guage problem, maybe the sending unit.

Good luck.

__________________
Peter
1985 300TD 4-speed 212K
1992 400E 343K
2001 E320 72K