I bought a can of compressed air at Wal-Mart and gave the temp sensor a blast or two and it started working right. Some people have commented that compressed air might damage the delicate sensor, but this didn't happen to me. Personally, imho air would less likley damage than physically touching it with something.

You might have a leaky heater core. The coolant circulates through the core at all times and the damper changes the amount of air that is directed through it to adjust the temp. You could have some steam beginning to leak out even though you don't smell it or have a wet carpet. Try moving the temp all the way to the coldest setting with the AC off and recirculate off - this completely shuts off the air flow through the core. If you get no foggy windows on this setting, it could be a clue. Also, if you leave the core shut off (temp on the coldest setting) for a while - if it's not too cold now where you live - then when you open it up by setting the temp warmer then if you have a leak you are more likely to smell the coolant steam because it will have become more concentrated from the core being closed off.