Water is probably circulating fine.

If it was my car, the first thing I'd do would be to fix the gauge (or sensor, but likely the gauge) with a new compensation board. Others like to do a no-cost fix, so whatever you like.

Put in a new thermostat.

The reading will probably be correct then. Or at least more accurate, so that you know what's going on.

With respect to the radiator hose, the cooler water comes from the lower hose after circulating through the radiator. That hose will be a lot cooler than the water in the upper hose.

does hose get hard quick? head gasket

First of all the gauge is the comp board failing..You can bypass it or replace it,,Bypassing is the way to go,, it shows true temp readings instead of the what I call average temp..The board was placed on US cars to quiet the simple people who could not understand that the temp does indeed go up and down on a regular bases..As for the hose,,, well it really sounds like it is cooling rather well.. The top hose is the feed hose from the engine and will indeed be rather hot,,The lower hose is the return hose and if the radiator is working properly then it should be a lot cooler than the top one... Do yourself a favor and replace the thermostat, it is necessary..It keeps water confined to the engine for proper heating of the engine for polution and correct opreating temperature then releases the water for proper cooling of the engine without temperature loss in the engine..This may also fix your hose temp difference as it will regulate the water flow better.. Also one thing, most overheating problems are due to Fan Clutch failure and a lot people will remove the thermostat thinking this iwll fix it.. Check the fan clutch..with that many miles it might be time for one..
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Max..1989 244 DL 5 Spd., Bilstein HD, Turbo Swaybars, Poly Bushings all round, Turbo Wheels, Black leather interior, Electric mirrors, LED dash and gauge lights.

Are you sure you have a problem? The lower hose is supposed to be cooler than the upper hose, since that water has already passed through the radiator. Of course, it all depends on how much cooler, I suppose. You need to find out.

After replacing the radiator, water pump and thermostat; plus the fact that the upper radiator hose is hot (meaning that water is flowing into it), and the heater works, please explain why you think you have a problem -- since your gauge hasn't been working since you made these changes (or am I wrong), how do you know there is a problem? By the way, your temperature gauge, before it stopped working, may not have been reliable, as there's a notorious problem with its circuit board (many people bypass the board, to get more accurate gauge readings).

You could buy a little hand-held infra-red remote sensing thermometer (about $80, and very useful for all sorts of things) to confirm your coolant temperatures (in either hose) even before you fix your gauge. I have one, and can just point it at my radiator hoses, or the radiator tank, and know exactly what my coolant temperature is.