95 Ford Escort Thermostat

I have a 95 ford escort. The thermostat guage in the car is not working properly. When I shift gears I notice that it moves as well and then it moves back down to the C, where it is not displaying the temperature. Could this be caused because the thermostat needs to be changed or is it possible it is something else? I am not sure if there is a sensor involved that could be broken. Any ideas?
Thanks

Ahhhh... the classic overcooling problem.
Search this forum for "overcooling" and you will find a wealth of info.
In short... consider these:
1. Thermostat
2. Temp sensor (there are two... the one you should be conserned with is the second one in the the hose when moving toward the firewall from the thermostat).
3. The thermostat housing. (To save some time, should you need this it costs about $40 and is listed as a "water outlet" at most of the parts stores).

Red arrow is temp sending unit.
http://files.automotiveforums.com/gallery/watermark.php?file=/500/353032Sensor.jpg