It would appear that the terminal on that spade connector is folded under and would normally go under one of the sender mounting bolts. But I doubt that is the problem for the "full" reading. Looking at the top of the sender it appears the terminal the pink wire is connected to may causing a short to the metal shell of the sender. This a short between the "S" terminal on the gauge (pink wire) and ground causes the gauge to peg full. If the pink wire has ever been removed and then tightened, it is possible the entire terminal has turned which turns a connecting tab under the sender flange thus causing it to touch ground and the same situation results. So -- disconnect the pink wire at the gauge. If it now drops to empty, you know the problem is the pink wire or the sender. You can also disconnect the pink wire at the sender but if the gauge does not drop to empty you still don't know if the issue is the wire or gauge so why not just disconnect it at the gauge first, then the sender. Senders are cheap (when compared to other marine stuff) if you need to replace it. It is also possible the float arm is stuck in the up (full) position.
