[hatzie]

Bouncing is normal in an air core meter. It can be mitigated somewhat with an injection of some special silicone damping gel. Gauge repair guys can do this for you pretty quick.

Not dropping below 1/2 tank indicates increased resistance somewhere in the circuit. Is the ground wire from the sender to the frame making good contact?

You can bench test a fuel gauge with a charged 12v battery, 4 alligator clip test leads, and a couple 1/2W resistors (100ohm and 50ohm 90 & 45 would be better but 100 & 50 are close enough).

It's worth noting that the resistors can get VERY HOT so be careful of where you place them... not on the kitchen table or those greasy rags.

If your gauge passes these tests it's not the problem.

• Lay the gauge face down with the 1/2 tank position pointing straight toward you and the indicator lamp window straight away from you.
  
• There are 3 studs on the back of the canister arranged at the points of a triangle.
  
• The (-) GND stud is at the apex of the triangle away from you and closest to the indicator light window. Clip your battery (-) to this stud.
  
• The (+) IGN stud is on the Left hand side of the gauge closest to you. Clip your battery (+) to this stud.
  
• With just the + & - studs hooked up the needle should go almost horizontal @ 3:00 on the face past full.
  
• The Sender stud is on the Right Hand side of the gauge closest to you. Hook a jumper from the ground to the sender stud. The gauge should drop to Empty.
  
• Remove the ground to sender jumper.
  
• Clip the 50ohm resistor between two test leads. Hook the loose ends of this from the ground stud to the sender stud. This should put the needle at just over 1/2.
  
• Un-clip the battery (+) lead and wait till the resistor cools enough to handle.
  
• Swap the 50 ohm to the 100 ohm resistor and hook the battry (+) lead back up. This should put the needle past Full but not 3:00.