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But then again I am having troubles understanding why the sensor wire is even running to the ignition switch in the first place?"
Me too 1luckpop. I have never had to think about it. And all I know is that it runs to the ignitoin switch. That lead can never be hot right - I mean it shouldn't be? That wire is basically a straight shot to ground (through the variable resistance of the sender). Maybe the ignition provides a direct ground when the key is in the off position.
I think, if I remember right, that while the oil pressure gauge just hangs where it was when the key was turned off, the coolant temperature indication pegs low. But that doesn't make sense either - a direct ground should make it peg high. Ah, but that's only when the other side of the ciol is hot.
Here is the schematic that includes the ignition switch and the internal connections at different positions, but I can't read it:
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