high temperature reading

i have a 1996 bmw 320i with the 2l vanos engine i lost a lot of my engine coolant and since this happened my temp gauge has been reading high with warning light on then quickly droping back to 3/4 or 1/2 it so eratic that im wondering if it is faulty .
the water level is fine im also thinking there could be somthing wrong with the thermostat as the temp is changeing so rapidly could a stuffed thermostat cause this problem as well.
well hope someone can tell me if i on the rite track or not any thoughts would b great .

Sounds like you got a bad stat. If you loose too much coolant it is not very good. Check for over boil, leaks from the pump,water in oil (foam), etc.

If the car has overheated the Thermostat does need to be changed. You need to pressure test your cap and radiator. Also tried to bleed the radiator you may have an air bubble running through the system and messin with the gauge.

I agree 100% with Tuffdrvr88 (http://www.automotiveforums.com/vbulletin/member.php?u=269466)

Thanks Corning_D3, almost forgot what it feels like to be agreed with lol