The gauge should not go to hot when you turn the ignition on. It should come up slightly if its warm out or just stay put until the engine starts to warm up. As the engine coolant warms up, the temp sensor gradually sends the voltage signal to ground, in effect creating a "shorted" circuit. The gauge then basically reads the amount of "short" that the sensor conducts to ground....the warmer the coolant, the bigger the short and corresponding higher reading on the gauge. So if your gauge reads fully hot either the sensor is sending full signal to ground or there is a short someplace in that circuits wiring, thereby fooling the gauge into thinking the sensor is reading hot coolant and doing it itself.
Since none of your other low voltage gauges work, it sounds like you may, instead, possibly have a faulty voltage regulator on the back of your gauge panel, or you do in fact have a bad ground someplace which can create all sorts of wacky problems. Problems like this are not always easy to track down. You have to start with every ground (and there are LOTS of small grounds to check on a gauge panel), making sure they are in fact getting a good ground to the chassis, then check voltage output of your panel regulator and go from there. I don't believe your car has a circuit board unless it's a '69 or newer, but I'm not familiar enough with your specific gauge panel to comment further without giving some bad info.