Inasmuch as the gauge indication and the IR indication (at cylinder head) are in rather close correspondence it seems fair to say that the gauge is OK.

So what's going on? The water pump on the subject engine is of relatively small diameter, and has a conical impeller. The cone of the impeller is matched by a conical surface in the pump housing. If 1) the impeller is too far from the housing surface,[due to mis-assembly during build/rebuild], or 2) the conical housing surface has become corroded/eroded, the flow capacity of the pump/housing package will be significantly reduced. A low rate of water flow will result in higher temperatures in the cylinder head.

How good is that MB pump? At a pump speed of 4500 RPM it will pump 80 gallons/minute. [That flow rate was observed during a dyno run when that pump was installed on a non-MB engine.]