There is a tendency among manufacturers, both import and domestic, to install a gauge as a classy version of an idiot light. The thinking goes that people scan their gauges infrequently and only for go-no go conditions; as long as the needle points straight up, they will assume the car is OK. If the needle then pops over into the red, they will assume "not OK" and stop the car. The corollary is that the manufacturer also assumes nobody uses the gauge for diagnostics or subtle trends since that would confuse the average user. So you get a gauge that shows basically three states: off, OK, not OK.

The solution is to install a better gauge behind the panel. And the problem is indeed the gauge: the sensor is a linear analog thermistor that gives reasonably accurate corrolations to temperature.
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See the 700/900 FAQ under 'Select Link' button on the top right.