I want to thank everyone who helped, especially @alldodge, who realized I was mixing things up. I replaced the sending unit, and it's working fine now!
I have a 99 5.7 GSI and I am having the same issue temp gage is pegged at key on/power. I also Have tried everything that I could think of, new gage, new temp switch checked wiring with no changes. this could be the issue. I "found" a two wire connector behind the #1 fuel pump and filter, under the coolant hoses and in front of the circuit breaker box (if that makes sense). looking at the engine its in the front left of the engine buried under the wires hoses and fuel stuff.Your mixing Temp sender and temp switch
The gauge at the helm uses the sender in your pic and goes direct to the gauge, it does not go to the ECM
Your motor also has a 2 pin temp switch that goes to your ECM (assuming J2-7). The temp switch closes when the temp gets to hot and sounds the alarm.
The temp sender and the gauge does not talk to the ECM, it's only there as a visual indication for the driver
the connector is round with two wires white/blue strip and grey and fits onto a round connector with a flat edge on one side (see pictures).
what is this plug I cant find these colors in any schematics or wire color charts that I can find.