Welcome !
It amazes me how much trust people put in the $3 factory termperature gauge.
16 years old too boot. ( not you, your mechs)
sorry, but no mechanic of any caliber ever pays any attention to any gauge , in the dash. ( it is just a data point, weak at best )
(well yes,after proving all is well, he will then fixes the blasted dash gauge)
I can see by your test (very good by the way) that engine is fine. (assuming complete)
1: no overheating symptoms at all ( save silly dash gauge) no knocking, or clouds of steam.
2:fluid expands as it gets hot and starts overflowing to.
3: oil light ( could be serious, or just a bad sender)
there are 3 critical paths here.
1: is engine overheating. ( Put an IR gun $10 harbor frieght , to the thermostat housing)
now look at the temperature , ahh 170 degress. (see my photos?)
over-heating-why?
http://carfix.stufftoread.com/Coolin...t-housing2.jpg
2: if not over heating you have 3 more choices.
DIY fix it. ( i have the list of checks and OHM readings to find it, at end.)
pay someone $$
3: or buy a real quality Dash guage temperature unit and install it. DYI or ?
what is best for you is up to you.
The factory guage has 3 parts.
1 the gauge ( a crude resistance heating bimetal needle )
2: the wires and connectionns
3: the sender on the thermostat housing.
anitfreeze will drop after swap due to bubbles working out.
but not after (in next few week )
PS: dont feel bad , even the Factory Service manual , FSM fails to put bad guage in the list of diagnosis of overheating. ( i guess they assume one has real overheating)
Id be more concerned at getting a oil pressure guage attached (real) to the same point the sender is attached, these cars run high pressures. (ask me)
are you running sewing machine oil in the car 5w or some such junk.
get it out of the car if you are, this engine was never designed for this oil nor is is a low mileage car , right.? want to throw a rod?
since I am here, here, is the Dashguage test for the Water tem meter , Fsm:
there are 2 tests ( 2 components, is way)
1: Guage
a: unplug the Y/w wire at sender. attach a 12 3.4w light bulb to this wire and the other contact of bulb to Ground,
b: key on , bulb will glow some and the needle will deflect some and stablize.
do not ground out the guage directly,or you will blow it up.
all it says is it must fluctuate, no other spec.
2: Sender.
unplug same wire.
ohm meter on sender term. and ground of block.
a: three data points.
122def F. 134 to 179 ohms
176d 48 to 57 ohms.
212d 26 to 29 ohms.
notice the wide range if inaccuracy of this crude instrument.? 20% ?
on the hot engine it will read between 30 -60 ohms, use interpolation to find it.
but the curve is logrithmic.
the guage is just a crude idea of the temperarture,
best is to buy , rent or barrow a real IR gauge, they are accurate to +- 1 deg. C.
that is all there is, on this gauge.