re: "...I'm concerned about letting it get real hot.... I don't have any way to actually measure engine temp...."

This is why I often recommend that folks get an IR (remote sensing) thermometer (e.g., RayTek, etc.) -- just aim it at the cover of the thermostat housing, the radiator's input and output tanks, even the engine's oil sump, and it gives you a good indication of the engine's condition and how well the cooling system is working. They're as cheap as $60 in some outlets, especially this "discount" season.

In fact, thanks to my RayTek, I made a good buy on my latest Volvo 240. It was being sold cheap, and appeared much better than the price would suggest -- but then I realized that every time I went to check it over, the temperature control had been pushed far to the hot side, more than it should have been. I realized that it was to forestall an overheating indication, and proved it by taking it out for still another test drive. But I also planned to have my RayTek with me, and sure enough after a while the temperature (on the gauge) started climbing into the red zone; and then I jumped out and used my RayTek, which proved that the coolant wasn't really getting hot at all! It was a faulty Temperature Compensation Board (TCB), notorious in these cars for failing in a variety of modes. Since the owner of the car was trying to cover up what he thought was a dangerously overheating car, I didn't see any moral obligation to reveal to him that the car really wasn't defective, and bargained with him for a good (for me) price.
Then I took the car home, removed the TCB and jumpered it so that the temperature gauge showed true temperature (like in any pre-'86 Volvo), and never saw any sign of overheating ever again.

re: "...A week ago I noticed the temp gage was hotter than usual (usual is 4:30 on a clock dial). When in stop and go traffic, the gage would rise to 2:45 position, but on the highway would drop to the usual position (we're in 35 degree air this winter). When hot, the fan was not running...."

Like the aforementioned '93 Volvo 240, I believe that your '96 850 also has a TCB that may be defective. Of course, you should first confirm with an IR thermometer that your car isn't really overheating, but if that's the case, then a bad TCB is a definite alternative explanation for your erratic temperatures.

Good luck.