Here is where things stand regarding the water temperature reading.

My water temp gauge had been reading high as spring arrived. Not sure what that was about, so I installed a 70 degree thermostat (Celsius), purged the coolant, and installed the new thermostat.

That did not fix my problem, as the temp gauge keep reading high (see pic). I tended to get high readings while driving for prolonged periods on the highway (anything over ten miles) at 3500+ RPM.

So I took a water temperature sensor one off a parts car and that one read low (first tick mark, or 1/4). I tended to believe this indication given the low thermostat setting.

Not wanting a used part, I bought a new sensor from CVI and installed it this morning. Now the gauge reads at the top of the green arc, right on the red.

So, I took laser temps of the following:

Radiator top hose: 185

Radiator bottom hose: 155

Back of the engine block (right next to the sensor): 215

I don't know what to trust. Are those temps within range? Has anyone else had similar issues with water temp sensors? Has anyone had issues with Smiths gauges (although I doubt this is the case, as the gauge read low with the sensor from the parts car).