Your guage problem is more than likely not the instrument cluster. There are a few things to check before doing anything drastic. The sensor for engine temp is between the middle glow plugs. Check for a snug connection and even wiggle it a little in case there is a little corrosion in the contact. Also, check your grounds especially, both battery to chassis and chassis to engine. On mine, a loose bracket on the engine ground caused fluctuation and false readings.

Don't suspect a leak right off. As most here will attest to, these engines are really hard to "burp". Run the engine to operating temp. then place your heater on high. Even after all of this, I have had to top the coolant after driving it a few times.

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Sam

84 300SD 350K+ miles ( Blue Belle )