‘66 Barracuda Fuel Gauge Pegged!

I'm not seeing a fault. You're still putting 12 volts in the fuel gauge which I don't like but... I don't know if that is the problem. If you want to open the fuel gauge and bend the thingy per RTE instructions, or completely amputate the original limiter, I can type out how I go about opening these gauges.
As for your test, that shows the wire isn't completely broken. To test is the wire is shorted to ground, one tester lead should be on ground.