The coolant level sensor needs a certain voltage across it. You can pull the boot back and stick a voltmeter to the contacts.Sometimes the ground side is not grounded well enough, which will cause the voltage to jump high.
RoRmy 85 was doing something similar to what you describe when i first got it.Did some checking of things in general, then put in a New Meyle coolant sensor - about $5. Cure.Have you already tried swapping in some various used ones yet ?
An mk2 with ce1 i worked on last year had an issue with either the battery indicator or the oil press indicator staying on (forget which). Swapped in another cluster and it went right back to being normal.If you guys have spare clusters (even a gas cluster) could give that a try.On that one, they wanted to retain the orig speedo into replacement cluster.So they did that themselves to save a buck.And the previous symptom followed along with their old speedo pod. lolSo i had to swap their old speedo guts into the replacement cluster speedo pod for them. Fun stuff for everyone as usual.