1998 SN with GT40. Put in the lake first time this year and by the time I got to the dock my temp gauge was almost up to 240. Engine did not seem hot and the manifolds were cool to teh touch. Lake water temp is 62 deg. 

I checked the temps with infrared thermometer and at the sensor on the water pump it was 160. Could find noreading over 160 anywheree. Troubleshhoting wiring and gauge etc. Found 0 ohms on wire from the gauge to the waterpump with both ends disconnected, so conetions there are good. cleaned up connections and temps readings came down but not acurate. 

Took a couple of ohm reaidng on the sensor as the block coolde down. 

IR temp 156     120 ohms,    gauge reads 200

IR temp 125     196 ohms,    Gauge reads over 180<>

I did a couple hours of searching but cant find any chart that tells me what the sensor should read at what temp. Did find and old post the Pete mentioned the senders are 30-240 ohms and linear. Butnot starting point. 

Gauge drops to low temp with poer off and pegs to high 240+ when grounded.   Would more info on this before throwing parts at it. 

Thanks for any help you may have. 

It looks like you might have changed the sender about 4 years ago.

Here's the old thread in the link with some numbers  that may or may not help. The link in that thread to Jamestown Distributors doesn't work anymore

http://www.correctcraftfan.com/forum/forum_posts.asp?TID=49111&title=water-temp-sender" rel="nofollow - link

I'd probably check for normal voltage going to the gauge positive connection and check all the connections clean and tight, but you've probably already done that.

it seems like your gauge itself isn't right, the ohm readings were about like what I got below

I took some readings on an engine and at 120 by IR gun the sender was 240 ohms

At 130 degrees it was 185 ohms 

At 140 degrees it was 175 ohms

That's all I could get cause the engine didn't get any hotter

After posting this thread I did find my old post. At that time I did not replace the sender, as the one I orrdered was the qring thread size, 

After my above testing I cleaned up all connections on the gauge and put back together but did not run the engine again. We went for a spin yesterday afternoon and gauge is now reading as it was in the past at 175 to 180 with the 160- degreee thermostat. IR readings at sender were at 160-165

I will do some testing on the voltages at the gauges and see where those are at. i have done this inhte past nad all was well, buthtat was a few years ago. 

I also ordered a new sender and some resistors to do some testing of the gauge itself. Will see what this gets me.