Just another thought out loud, are you sure the correct wires are going to the correct sender? I have seen people switch these by accident in a rush to get the job done. The temp sensor wire should be tan and the alarm should be tan with a blue tracer. Also have seen these wires get crushed under the housing when they are put back on also.

Just a brotha's .02 !!!

John S.

1 of my motors was doing the samething this weekend after replacing the t-stat. Temp gauge reading was fine, so the housing was grounded thru the gasket alright, but still alarm sounded intermittent. Had a poor plug connection at the alarm sender. Plugged/unplugged it a few times, problem fixed.

Just fixed similar problem on my new 540, Oil Temp would spike after 30 minutes of running and then keep the needle pegged after engine cooled. It turned out to be a break in the insulation of the sensor wire shorting to the block (as it ran close to a sharp edged bracket) when the engine warmed up. Re routed wire and shrink wrapped the break, now all is good. Lots of other work and tests were done before finding the wire that was shorted as it did not stay shorted overnight, only when engine warmed up. Missed two weekends of boating troubleshooting.