Lumbergh,
Bill is correct, the sending unit is a variable ground. The catch is that it isn't expected to pass much current. A #16 wire is good for about 8 amps. If you are actually burning this wire up it tells you that it is drawing 8 amps plus. This would be a huge amount of current for a temperature gauge. My bet is that the solid state gauge is cooked and taking any power attached to it straight to ground...this means all the current the wire can carry, until if melts in two.
Another possibility would be the solid state gauge has shorted internally and is passing power 'through it' and to ground at the sending unit. The wire from gauge to sender should show some signs of overheating if this is true. A simple test would be to disconnect the gauge to sender wire and see if something changes.
If you are going to dink with this thing, stick a inline fuse in the power to the gauge and save replacing wires as you experiment. Most solid state devices fail 'open'...they just quit working.
EDIT. As this is a special type gauge, did the manufacturer provide any special instructions for installation like a resistor inline on the power side.
Stuart
