Hi,
A gauge doing funny things is typical of a bad compensation board. I remove them as a matter of course because I want a straight gauge that just reads the temperature. It's very easy to do.
Every 240 I've ever had goes steadily up to about 9 o'clock. If you watch it very closely, you might see a small dip when the thermostat opens, but they never go anywhere near the red. If it did I would suspect a sticky t-stat.
I would use any potable water to flush the system. I don't see any reason to use distilled water for that.
Go to clean flame trap.com to troubleshoot your fuel gauge. I think you'll find info on the comp board there as well.
Peter
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