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Hello Everyone,
I'm wondering if this isn't a quirk of the 1989 model year, but that theory wouldn't make sense if you've tried different dash clusters.
My readings looked very much like yours, I've posted pictures:

http://www.brickboard.com/GALLERY/volvopic.htm?js_link=&id=9258
The link above shows my dash with two different gauges post compensation board bypass. I ordered the kit from IPD and installed it correctly. It would just climb up to right before the red and stay there, idling, highway, or otherwise. The right is a gloss finish earlier year replacement gauge after the original read very high after jumpering. This second reading appears identical to the one you've posted. The car is a 1989 245. These high readings were seen after a full cooling system overhaul: new Hepu pump, new Nissens original style radiator, all new Mackay hoses including heater hoses, coolant flush (before new rad), new OEM tropical fan clutch, new OEM fan blade, new 87 degree Wahler thermostat, new OEM Bosch coolant temp sensor, new sensor to gauge, new voltage stabilizer for the dash. The wiring from the sensor to the gauge was intact and sound. The car showed no sign of running hot even with incredibly high dash readings.
I bought an Autometer digital read gauge with sensor installed in the block drain:

http://www.brickboard.com/GALLERY/volvopic.htm?id=9255
I'll list two other threads I've found with posts by owners of 1989 cars who have trouble with their gauges after bypassing the compensation board. I recall seeing more but these are the only two I had bookmarked.
water temp gauge
Temperature Compensation Board
Just wanted to add my experience with this issue.
Best,
Brandice
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1989 Volvo 245 DL, white
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