FUEL GAUGE ISSUES, NEW SENDER BUT GAUGE STILL INACCURATE Options

[OLAF]

I'm stumped. '71 model 914. Verified Gauge is working properly and New Sender Unit.
Problem: my fuel gauge reads only 1/4 tank when the tank is full.

I pulled the sender and bench tests indicated the float sticking. I bought a new one from Stoddard. $100.

I also pulled the gauge and bench tested it at 12v to the "+" terminal with ground to terminal 6 and terminal 4. The gauge needle pegs to "full". It's working properly.

Prior to installation of the sender into the tank, I attached the New Sender to the harness and with the ignition on, moved the sender through upright and inverted positions, (simulating an empty and full tank). The gauge needle swings as it should through "empty" and "full" readings.

Once the sender is installed in the tank however, it only reads 1/4 full (although the tank is full).

I surmised that the Float in the New Sender wasn't moving in the tank due to less then adequate adgitation in the sender cylinder (it's vent holes are small). So I removed the innards of the sender and drilled several holes through the cylinder as a remedy.

Retested the sender out of the tank and the gauge swings empty to full as it should.

Installed the sender in the tank. But, the gauge still reads only 1/4 full.

I removed the sender and bench tested it in a bucket of water and can see the float moving easily through the new large vent holes.

Why will the gauge work properly when the sender is outside the tank but not work when the gauge is installed into the tank??

THANK YOU ALL for your suggestions... I'm Stumped

Sorry, my photos are "too large" to be attached. I don't know why...

[fixer34]

Agree, very unusual.

Is there any way to block the float at or near the top (so gauge shows full), then gently lower the gauge into the tank and make sure it still reads correctly?
Since the cylinder is basically sealed and you have proven it moves freely, that pretty much rules out mechanical interference.
Almost like an electrical issue where seating it in the tank adds extra resistance.

Do you have an ohmmeter/multimeter by any chance. Take resistance readings from the G pin to the ground terminal with it out of the tank, both 'empty' and 'full'.
Put the sender in the tank, check the resistance reading again. Do not connect the cable/plug or turn the ignition. Does the resistance reading match full of empty/quarter full?