What does the stock temp guage read from?

A sensor mounts into the front of the lower intake manifold - drivers side. Has a single wire going to it.

temp_sensor.jpg
 
The sensor referenced in the pic is the factory electrical sending unit for the factory temp gauge. If you choose to add an aftermarket electrical temp gauge it will come with it's own sending unit that can be installed in several locations, one of which is where the factory one is. Some guys buy a different t-stat housing which has threads for another sending unit, this way you can run both if you want.
 
HoofnIt said:
You can always drill and tap a whole in your stock t-stat housing. It's aluminum and will save you some cash.

That's what I just did - there is a place on the top center of the housing that is custom made for it. Use a 9/16" drill (neched down to 1/2" for a drill) and a 3/8" NPT tap to do the job.