I had a very similiar issue, but mine turned out to be a stuck thermostat. Installed a Reisch 170 and problem was solved. I noticed that the dash gage and scanner indicated temperature go hand in hand, up and down the scale, so I now trust my dash gage to give me the temp at all times. I think this 1 FOR 1 accuracy is done with the Gearhead tune. With the *****, the gage temperature roamed around for two or three weeks while driving after the install, and coolant blew out the overflow, but temp now reads steady at all times. The coolant tank also adjusted itself to the correct level over that same time period. Funny, I thought the water pump was bad, but we put the car up on the lift at the dealer, and they shined the light up, showing me the water pump bypass opening was dry, and the coolant was coming from the fill tank, blowing off excess fluid.
I always test new and used thermostats in hot water, slowly warming the water while monitoring the water temperature. I found at least one defective NEW thermostat doing this over 50 years, and of course, found the aforementioned stuck thermostat the same way. It's a simple process, and for me, has avoided much trouble and heartache!
My previous thermostat was a 160 from Livernois, (don't ever buy ANYTHING FROM LIVERNOIS) and it was indeed, frozen shut.
SHOBLOCK