Steve,
A resistor in the gauge circuit will only make the reading lower. The gauge is notorious for issues with grounding. Try adding a separate ground wire from the gauge to a really good ground point.
If that doesn't solve the problem, you may have a bad gauge or the wrong sender.
One other possibility is that the wire that goes from the sender to the gauge is contacting a grounded surface, meaning that the wire's insulation has been worn off (somewhere). As a test, you could run a temporary wire from the sender to the gauge. I assume that the gauge reading slowly climbs to the 260* mark rather than moving quickly once the key is turned on.
John
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