Hi,
I have a BMW 324td (E30), largely similar to 325 I believe, and recently on long journeys the temp guage is behaving strangely. For a while it seems fine, hovering arouind the middle. Then can rise up to 3/4 but then coming back down. On occasion or if in traffic the needle seems to dance around somewhat randomly but largely going up until it reaches the red. There is no emulsion on the filler cap and the water level doesn't seem to change. I've stopped a couple of times but have never seen it actually steaming. I find this a little disconcerting as I don't know if the car is actually overheating or if its a faulty temperature reader, when I've felt the pipes they are hot though.