Tale of the faulty fuel gauge!!!

The problem is most likely the sending unit not being designed for the gauge it's driving. The gauge works based on the current supplied by the variable resistor on the sending unit. Variable resistors typically come in two formats, linear taper, or logarithmic taper. With a linear taper unit, the amount of resistance changes the same amount with float height anywhere on the scale. With a log taper, the resistance changes on a logarithmic scale with float travel, so the first three inches might change it by 50 ohms, and the next 3 inches could change it by 500 ohms. Many times, aftermarket sending units will use a different electrical taper than the OEM unit. What this means, is that at a given float position, the aftermarket unit is not supplying the same resistance to the circuit that the OEM sender did, and the gauge reads improperly. This happens most frequently with a sending unit that's "designed" to fit multiple applications. If you can find an OEM sending unit, or one with the correct taper, the gauge will likely work properly.