Could Teflon tape or pipe sealant on the treads of the sending unit be messing with the connectivity of the ground?
Try an ohmmeter between the case of the sender and a good clean ground on the engine. There should be next to no resistance.
On my 284 (2006) tractor the oil sender had two connections. I got them reversed one time and boy did that cause goofy readings on the dash! I thought the two were power and ground, turns out one was for the oil light and one was for the gauge. (one was a switch and the other was a variable resistor) Swapped them back and all was well. They both ground through the body of the sender to the engine block.