The needle on my temp guage will stay on cool untill the motor worms up. Then it will bottom out and come back to normal. When going down the road it will bounch around and sometimes reads OK. I don't know if its the warter pump or the thermostat is sticking, bouth are not that old. My "Q" is which may be the problem or could it be something ealse?
Sounds like the gauge is going bad to me, but it could also be the sender. I would try picking up a gauge and sender from a junkyard (sender is small enough to pocket).
Is the sender located on the tremostate cover , there are two plugs one has a tab on it and it is corroded.