well that unit...which goes into the head and is located under the #2 intake runner and has a single wire coming off of it is definately the temp guage senesor. Now if the guage reacts...aka reads hot when you ground the wire coming off of that unit then the sensor is bad...plain and simple. Last I looked the sensor was only about $15. I was able to replace mine without removing the intake manifold (I have been graced with small hands). I did have to remove the distributor cap however. I would recomend using a thread sealer or teflon tape to seal the threads, as mine began to leak after sever heatings and cooling...it was easily remedied by tightening it further but beware putting too much force into that as the head is aluminum and you will strip the threads if care is not exercised.

Oh yeah....and find a dealer who knows what he is talking about (easier said than done)