I had the same issue. Here is what SOBill said:
From 2-23-09
Dave,
12V is applied to the temp gauge. The temp gauge divides this voltage and sends part of it to the temp sender in the engine. The temp sender is a resistor connected to chassis ground. Inside the gauge the divider circuit and a light bulb are both connected to a terminal on the gauge case. The terminal on the gauge case is connected to a like terminal on all the other gauge cases ("daisy chained") and eventually connected to chassis ground.
When you turn on the headlight, you also turn on the lights in all the gauges. The current drawn by all the light bulbs in the gauges will cause the ground terminal on each gauge to be at a slightly higher voltage than the ground terminal at the sender for that gauge. This difference in voltage between the two ground points for the temperature gauge will cause the temperature needle to move up scale.
See
http://www.panteraplace.com/El...20Temp%20Fig%203.jpg for the details of the gauge circuitry. Just imagine that the ground connection on the right hand coil in the gauge (which is the ground terminal on the gauge case) and the ground connection from the sensor (which is on the engine, via the ground strap at the ZF) are at different voltage levels. Elementary, my dear Watson.
So there you have it.
To solve this problem, connect a wire directly from the ground terminal on the temp gauge to a solid chassis ground. The factory connected the gauge grounds in a "daisy chain" because it was simple and easy. Each gauge should have a direct connection to ground. In fact, the lighting circuit should have a separate power and ground from the sensing circuit ..... sort of like the space shuttle does it.
Mike Drew suggests adding a second ground connection to the daisy chain at which ever gauge has a single black wire on it's ground terminal. That fix might work, can't hurt to try.
Attached are pictures of a test I did with my temp gauge and a one ohm resistor.
Have fun,
SOBill Taylor
sobill@aol.com