Have you bypassed the temperature gauge "compensation" board? This is a small circuit board plugged into the cluster which changes the behavior of the temp. gauge so that it stays in the center most of the time. When it goes bad, it can cause all kinds of strange readings. Search the board for many posts instructing the bypass procedure.
It sounds to me like a clogged radiator, though. The rad in my '93 died only about a year ago, and it was pretty clogged with plaque. Ever since replacing it, the temp stays in the middle of the gauge in almost all conditions. Even if the radiator is not clogged, the mineral deposits inside can reduce cooling efficiency a great deal.
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