Thanks David. I was about to go down the same path when I found this:
http://www.egauges.com/vdo_send.asp?Sender=250F_120C See part number: 323-026
Its a VDO sender with two contacts, one for the VDO gauge, and the other for warning light operation (triggering at 209F). It says the thread size is 5/8-18 NF-3 (in a previous post, USA-90 mentioned that the thread size for our 2GMs was 5/8").
Has anyone seen this or know why it might not work? I dont know if 209F is is the proper alarm trigger temp or not.
I was about to go down the "T-connector in line to water heater" route when I found this, so I may be tempted to get the VDO gauge and two different senders to give this a try.
-dan