Sometimes the sensor develops a small seep and lets a very small amount of
coolant out around where the plug attaches to the sensor.  The coolant short
circuits the sender and makes the light go hay wire.  Happened on my parents
Jetta and replacing the sender solved the problem.  Also hair line cracks in
the expansion tank around the hole where the sender screws in could be seeping
a small amount of coolant to allow the same thing to happen.  Unplug the
sender and look down at where it attaches.  Is there any dampness in there at
all?  Take a q-tip and dab at it a little and then see if it turns green (or
blue for you Dealer purists).
This is probably your problem.
Let me know what you discover.
Ken Wilford
John 3:16