Tempature gauge in dash? Does it have anything to do with how the car runs?

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Only if you damaged or disconnected the engine to chassis ground strap. It runs from the chassis below the wiper motor to the cylinder head or intake manifold. That causes the gauge not to work and takes away the alternator and ignition system chassis ground.
 
The stock temp gauge is pretty much separate from the actual functions of the engine, aside from the aforementioned ground. The Engine Coolant Temperature Sensor (ECT, mounted on the opposite side of the intake off your heater pipe), however, is a different story ... but it has little or nothing to do with the temperature gauge on your dash.

Mine was freaking out on the '86 GT and showing the temperature as being pegged HOT when it had only been running for maybe two minutes - I could put my hand on the motor anywhere (except the exhaust, obviously) and it was still perfectly cool. Changing the temp sending unit didn't solve it, either. I simply unscrewed the sending unit and left it lying atop the intake, then threaded in an aftermarket gauge which I've mounted in place of where the HVAC controls once were on the dash. Reads perfectly normal, now.
 
Yeah I'll have to take all of it aloose again. The needle didnt seem to have a set spot to put it on the shaft from the gauge. Thats the reason the needle got put back on wrong. I think I spun the shaft and then put the needle on so I guess I will take it back apart pull the needle back off crank the car then put the needle back on in its lowest temp reading spot. Acourse I will be doing this when the car is cold.