Only the end needs to be in the coolant. I assume you used a reducer bushing, but hopefully you didn't use sealant or teflon tape on it- if you did, that explains your "barely works" issue. The sending unit works by variably grounding through it's body, sealant or tape only prevents it from grounding, and you've got two layers of it with the reducer bushing. To check, attach a ground strap to the sender (alligator clip, wire) and to a solid ground. If the sender now works, then pull it out and strip off all sealer and tape, and reassemble. These pieces utilize pipe threads, and should not require sealer when correctly installed.
