Ooops. I somehow missed the point that the symptoms came back immediately with the new thermostat - my bad.
First, be sure there are no air bubbles in the system and that the coolant level is not low. Check at all the bleeders.
The next thing, I would check the temperature sending unit (on the same pipe/assembly as the thermostat housing). For '95/'96, the ETM says the sensor should measure 142 Ohms at 56C/133F and 49 to 32 Ohms at 85 to 100C (185-212F). So, roughly speaking, in the normal operating temperature range that's 1 Ohm change per 1 degree C. Based on how steady my gage is from local to highway driving, my WAG is you shouldn't see more than about a
5 Ohm change.
It would be reasonably easy to disconnect the lead at the sensor, connect up an Ohmmeter to the sensor & ground (at the sensor body) with the leads going into the passenger compartment. Then go for a ride and take readings. If the readings are steady, its the temperature gage. If its something in the dashboard affecting the temperature gage, such as a bad ground, it usually would affect all the gages.
As part of the above, make sure the electrical connector and the sender contact itself are clean and making good contact.
A remote possibility - but you would notice that - is the heater is stuck fully open, dumping all the heat into the passenger compartment.
Let us know what you find.
