You just described the EXACT same problem/symptoms/causes I had with my '93 244, a week after I bought it too!

I first replaced the aux. A/C fan relay. I'm not sure if the '89 has that electric fan, but I think not. It was indeed bad, but the problem remained. For a while I thought I knew what conditions would make it "overheat". But the symptoms and causes just got more weird. Too cool, then too hot. Fine for 30 minutes, then wacky. A/C on, overheat, heat to full, she "cooled" off. Frustrating!!

I replaced the termostat. No change. I finally gave in and did the "Temp. Compensator Board Fix" that you can read about all over the archives. Yes, indeed, that was the problem. 2 months later, the little needle is rock solid on the dot (once warmed up).

If you can, pop into a mechanic to see if the coolant is really "overheated" the next time the needle pegs. My bet is not. The gauge, more specifically the accompanying electronics, are causing a false reading. So before spending any more money, make sure the car is really overheating.

Good luck with it.

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Pete