First off, that is the wrong sending unit for the stock fuel guage. The stock guage requires a 30 ohm sending unit. Now, as to the bouncing, that is pretty typical. Some are worse than others, but any truck that is still using the original fuel tank will slosh around pretty good. My '71 bounces pretty good. As to accuracy, it varies depending on the condition of the guage and the sending unit. My '71 is pretty accurate while my '63 C20 is off by about 1/4 tank.
As to the warning lights, I am not 100% sure on the '65, but I know that the '63's have a similar red lense setup and on those one is for an overspeed indicator and another is for a tandem lock. You have to remember that the guage clusters in the pickups and big trucks were the same just some stuff left off on the pickups, like the tandem lock indicators. I am assuming that is the case on your '65, anyway.
