You might check the wiring from the temp. sender under the intake manifold.If trhe insulation falls offf the gauge will peg. I've had to fix that on every Volvo I've owned.

I gave up on the temperature compensating board and put in the jumper like rstarkie says. So far I'm happy with the results. When my temp board was in and acting up, it did not do what yours is doing. The temperature would go up into the red regardless of whether the lights were on or not. A whack on the dash just above the guages would often make the guage go down to the normal 9:00 reading.
I would suspect the voltage stabilizer isn't working. This stabilizer takes whatever voltage is presents in your car's system ( about 12.5 to 14.5 volts) and regulates the voltage supplied to the fuel and temperature guages to 10 volts as I recall. When you turn on your lights, the system voltage drops a little. If the voltage stabilizer is bad both fuel amd temp guages should act up. If the fuel is ok, it may be the temp comp board but, as I said mine acted differently. I suppose those boards can fail in different ways.

Why not eliminate the compensation board and you will not have to worry about it any more?

Randy

I would say YES