The engine temp sensor is not used for your climate control. It is a monitored sensor for the PCM to turn on the fan to cool the engine. It sound like you have a problem with your heater core, or the blend door inside the air box, in the dash. The blend door changes or mixes the air flow from the a/c and heat. If the the thermostat is ok then the upper rad hose should hot when the engine is at regular operating temp. If it is cool or just a little warm then the thermostat may be the cause as well.
