Tom, another thing that's the classic mistake for home mechanics familiar with fixing pipe threads around the house, is to use too many turns of teflon plumber's tape on the sending unit pipe threads. The sender is a single wire assembly and is intended to ground through the block; too much pipe tape insulates the sender. Before doing anything, try grounding your rig as it now with a jumper. If it works, the fix is using only one full wrap of pipe tape.
FWIW, I agree with Jim- sender in the water pump can also pick up cavitation inside the pump and give erroneous (or no) reading at higher engine speeds. Oh- and installing a spade lug on the threaded sender stud: it's easy to overtighten if you only use one nut. Too much torque can actually pull the threaded stud out of the sender, breaking electrical contact on a new sender. Instead, use TWO nuts with the spade lug in between, and tighten the nuts against each other with two wrenches.