The sender in the tank has malfunctioned. There are two sensors in
the sender. One is a sliding contact on a shaft that runs against
resistance wire. The more current that goes to the gauge, the more
fuel is shown on your gauge in the cabin of the vehicle. Your
resistance wire has broken, so the sender is sending no electricity to
gauge when the fuel level raises the sensor above the break in the
The "low fuel" warning light operates more simply. The same float
that moves the other sensor along the coil of resistance wire also has
a fixed contact sticking out from it and when the sensor drops to a
low level, that contact meets another low on the shaft and completes
the circuit, turning on the low fuel light.
So, in general, you can trust the low fuel light, and probably also
the gauge once it starts to register.
You can remove the sender and try and replace the resistance wire if
you can find any anyplace. I fixed the sender on my 1982 300 TDT, but
it was really hard to get the resistance wire because nobody sells it
retail and the wholesalers sell it in 100 meter lengths that cost more
than a new sender. I finally just hit on a guy at a wholesale place I
found by doing a Google search for resistance wire who sent me 34
meters of wire for free.
To find out what size of wire you need you have to remove the old wire
and then use an ohmmeter and metric measuring device to calculate the
ohms of resistance per millimeter. You can use Imperial units if you
like, but you will get only close then and your gauge may slightly
vary from the factory operation. Resistance per length of wire is the
If that sounds impossible then you should get a new sender.
Resistance wire available here: http://www.bobmartinco.com/reswire.htm