I looked in my 1999 mach z and formula III (600/700/800) shop manual and heres what it says on the gauges:
False fuel and temperature gauge readings
1. Verify if gauge was connected on DC current by mistake(in case of optional installation).
a. Faulty installation of optional equipment
Find optional wires connected directly to DC ground (BK wire to chassis) or to any DC hot wire (RD RD/BL). Disconnect and reconnect to AC current (YL and YL/BK wires)
2. Verify sender unit for free movement and/or correct arm position
a. defective or damaged part
3. Verify sender unit/gauge wiring harness condition
a. Heating, rotating or sharp part in contact with harness.
I'm not sure what they mean by the sender unit but maybe its the temperature sensor. It' s located on the back of the engine adjacent to the brake rotor and it screws into the engine block. It probably has a connector plug attached to it. I'm not a sled repair guy, but thought this may help.