After testing and testing my cooling system, it seems that on my 87 240 wagon, the temp gauge needle is on the 9 o clock position, where it needs to be. When i turn my headlights (therefore dash lights) on, the needle climbs to the 3/4 position. sometimes, after a while, it goes back to normal. when i am driving (at night) and turn my dash lights off, the needle goes back to normal. I've already removed the compensation board and used a jumper wire.

 

That sounds more like a bad ground to me. If that's the case, you're getting feedback from the lighting into the gauge.