If the wire from the oil temp gauge is disconnected from the sender and grounded to the chassis, should this cause the gauge to read a maximum temp ? I assume that as oil gets hotter, resistance is reduced activating the needle in the gauge ?

I believe that is how it works. I know that when I smashed my temp sender wire (between the motor mount bracket and the mount, I think) the gauge pegged full hot. Scared the crap out of me at first.

--DD

I'm also trying to troubleshoot my incorrect-reading oil temp gauge. Except mine is on the opposite end in that it's reading too low.
If the sender fails does it typically read too low or does it short to ground and read too high?

I haven't had a sender fail on me. It's important to match the senders max temp to your gauge. The best way I found to determine what the sender is doing is to remove it from the engine and submerge it in boiling water- a known temperature. IIRC, you will have to ground the sender to chassis while doing this; that is because the sender reduces resistance as it get hotter.

Check the sender. There is a temp marked on the hex part

These temp sensors are Negative Coefficient Thermistors.
The resistance goes down as the temperature goes up.

They approach a dead short as the oil temp exceeds 300 degrees (IIRC).

So yes, shorting the wire should peg the meter to the Hot side.

Be sure your sender matches the gage.

If you can take the gauge to the kitchen it is easier. I used a 12v battery from my drill and a few wires and aligator clips. Get a wire to hang the sensor in the pan of water so it is only touching water.

If you look closely at the outside edge of the gauge you will see #s to help you. Stick a meat thermo in the water set on *C and compare.

I'll see if I can find my post with pictures.

FOUND IT

That thread is good for testing only. We did not fix anything by adding a POT, ignore that part. I ended up getting new gauge guts, but have not gotten my taco plate etc... coming from across the pond. I'll re-try to fix at my next oil change.