I do know that the gauge lies. On VAG cars the actual water temp can be about 10o out and it will stay at 90o. I guess it's to stop people being alarmed.
what!? thats stupid, if thats the case then there is no point in even having the gauge in the first place!? 
Not really. Why do you think they stopped fitting oil pressure guages? Peeps were told that the oil pressure should run at say 40psi, yet when the oil gets really hot, and you let the engine idle, the pressure can drop down to 10 psi, and the drivers arses started twitching, and kept running to their stealers. That is why you now just get an oil pressure light, which simply warns you when the pressure drops too low.
On many cars, particularly small or city cars (the Vauxhall Corsa is a classic example) don't have a temperature guage, just a warning light to tell you when it is too hot. Problem with doing away with the coolant guage, is that we really need to know when the engine is both too cold and too hot!