Besides changing the thermostat, try slapping the dash just above the temp guage the next time it goes up to the red. If the needle drops back down, you have the typical "temperature compensation board" failure. This board plugs onto the back of the instrument cluster on 4 pins. When the connections to these pins becomes poor through corrosion or vibration, thetemperature guage becomes erratic. Banging on the dash temporarily makes the board work.

You can try cleaning the pin contacts as described in the Bentley manual or on this site. I did that twice on my '86 240 and the guage worked for awhile then quit. The third time I jumpered the pins 1 and 3 to bypass the temp comp board. I like having actual temperature variations show up on the guage.

I think the stalling is a separate problem. You might try cleaning the throttle body and the Idle Control Motor. I'd bet the belt squeal is the power steering pump bringing pressure back up after the engine nearly stalls. The belt may be a little loose. It's not the fuel pump.