Richard,
Sealant on the threads could cause the sending unit to send a signal that's not accurate. Some sending units (one wire of course) use the threaded section to ground the unit. The temperature reading (IIRC) is a result of resistance.
One of the issues with my engine is that I use two temperature senders. The water pump / fan is controlled from a switch in the left front cylinder head. I moved the temperature gauge sender to the right rear cylinder head. There is about 10 degrees difference in readings so it was a little eye opening when I first saw it. I've since learned that the difference is common and isn't a problem.
My water pump controller has a digital display that indicates when the pump is running. I can also sort of track it by watching the temperature gauge cause the temp will drop immediately.
I'm currently in the process of switching from carburated to a Terminator EFI from Holly. Their ECU is supposed to tie into a temperature sensor and now I'm not sure where to put it. I think I'll try to tie in into an existing switch. May or may not be possible or advisable. Guess I'll find out.