I am having basically the same problem, my gauge at times starts jumping all over the place from 100 to 60 and back then starts to climb over 120 which is when I get concerned and turn off the AC and put on the ehat to drop the temp. However when the gauge shows 120C I used my infrared heat gun and the hottest part on the cooling system I could find only registered 97C. I dont want to have a false sense of security with this car. I just got ot and its in awesome shape with absolutely no rust. Its a 1995 E300D.

Where is the temperature sensor? Is it where the wire goes to the coolant plastic tank? Has anyone installed another gauge instead? I was thinking of that because my oil pressure gauge also registers at the highest mark constantly.

Can these two gauge issues have the same problem?