I had this same issue on my 97 with the 5.9. I went back to the auto parts store 4 times before I got one that read correctly, kinda. First one showed around 260 running temp, 2nd one barely made the gauge work, 3rd had a dead short (pegged the gauge), and the 4th showed consistently 15 degrees above computer temp and previous sensor.
The one thing I figured out through all of that was the gauge is nothing but a monitor point. If you can figure out where the normal range is, the actual temp the gauge shows is of little consequence.