1 Thermostat (Does your heater still work properly? If so, it's probably not the thermostat, but if the heater is pretty lukewarm, suspect the thermostat first.)

2 Check security of connection to thermosensor (screwed into thermostat housing)

3 Gauge Disconnect the lead from the thermosensor and connect the connector which was on the central terminal to a resistor lead, the other resistor lead should be earthed. Switch on ignition.
You'll need three resistors
~180 ohm no deflection of temp gauge
~100 ohm gauge should read somewhere near normal
~20 ohm gauge should be on H - full deflection

Get resistors from a hobby electronics shop eg Maplins (values aren't critical - you may not find a 20 - get 18 ohm instead)

4) Thermosensor Disconnect lead from thermosensor. Measure resistance (from central terminal via multimeter set to 'resistance' to earth) with the engine at normal working temp. Resistance should be about 100 ohms

5) a wiring fault somewhere (1/00)