Hey AH64ID, I have that exact setup. The problem with mounting the oil temp sending unit that high is it doesn't read anywhere near accurately. Reads very low all the time. I'm planning on changing my configuration at some point.
How low? That seems really odd as thats fresh oil and flowing all the time.
It usually reads less than 140°F (lowest reading on the gauge).
I've always assumed it's because the sender is transferring heat to the air because it's elevated.
Ryan
Have you tried putting the sender in hot water to verify its accuracy?
Also do you have a bypass? Or just the sender in the "T"?
My plumbing is just like yours - a tee with a branch going to a pressure gauge and the temp sender in the other branch.