The fan works on a different sender. When you test to ground are you using the sensor housing or the engine block? Did you use any tape when you installed the new sender? The threads must be bare and clean.
Yeah the fan switch is up front but just saying it is cycling in relation to the gauge only reading 120 . I did not use Teflon but did use rtv on the threads.I didn't think that was the problem since it does come up to 120 and quit.
You probably are experiencing a problem that occurs on all Fiero's. The wiring to the temp gauge is wired in such a way that when you turn the car on it tests the idiot lights. When it does that it pegs the temp gauge and it eventually spins the dial out of calibration. I believe there are some on here who can point you to what you have to do to fix the problem. I had this problem and when I had my engine swapped one of the mechanics fixed my temp gauge.
So I would do a search of the forum for this problem or maybe visit the Ogre's Cave where he might explain it better and have the fix too.