1990 300TE wagon - "swinging" temperature guage

[86560SEL]

Since my question about this was originally on a transmission post and not getting much information, I will start a new topic about this.

I am considering a 1990 300TE wagon. The owner has installed a new water pump, but the temperature guage will "swing" or as he says "dance" around. It will sometimes go about 3/4 of the way, but never stays there. He said it will go down when the heater is on (back when heat was needed). He said it has been like this for a while and he was told it was a sensor to the guage causing this. I am thinking though that if this was the case, why does it go down when the heater is on? I was told by a fellow Mercedes owner here that it could be a bad radiator, as the car is 15 years old.

Has anyone else ever had the "dancing" temperature guage issue? He said he is about to embark on a 5 hour trip in the car and will let me know how it goes. I just want to be sure it is not a bad headgasket. He said there was no coolant loss though, nor any oil in radiator, or water in oil, so I doubt this is it.

Thanks in advance.