Ok, thanks everybody!
It seems like I have it wired correctly, although from what everyone is saying, if I had those two leads reversed, it wouldn't make a difference.
It turns out that now its working properly, or at least better. I found about 6 inches of corroded wire in the harness on the yellow and red wire over by the transmission plug. I replaced this and now the temp gauge is coming up to just above the solid white into the normal range.
I'm using an 80c thermostat.
(Some back history on this 86 is that it was in some kind of accident on the driver side, and there was a pretty violent slash in the frame section right above the transmission. So violent that it cut into some of the wiring, and I don't think the prior engine was the original engine or tranny for this car, looked to be from an mk1 actually. So basically, the wiring was damaged by an accident, hacked when repaired and replacement engine put in, hacked again when a VO system was sloppily installed, hacked again when someone removed the vo system and tried to make performance upgrades, hacked again when the PO kid starting adding a sound system and leaving wires everywhere before he blew the engine, an finally I come along with a new wiring harness and another engine.

)
I'm surprised it actually runs at all honestly, I haven't moved into the cabin yet following the wiring. The radiator, fan, relay, and temp switch I moved from my 85 where it was previously working, but that switch could be bad, it did sit for over a year. I might direct control it with a switch like mentioned above.