[edited]
Randy
The BC temp sender being on the butt end of the TStat cap might not be issue as far as shorting out but still, it will never hurt.... You want a Blue Sea # 4008 boot, WorstMarine, Defender, etc.
You did check it with the engine cover off [no insulation interfering]?
The Universal B engines sported a black RV plug on the harness (if you look at the cut sheet for the M25XPB on the WIKI you can see it. I presume that CTY kept the switch [RV plug] in place. Sorry, I can't link you to it cuz I haven't had access to the wiki for like 6 months. See WIKI > MANUALS
The schematic for the BC engines is also on the Wiki WIKI > MANUALS.
Again, if the gauge is pinned high then the S wire is permanently grounded somewhere, not a "bad connection" (i.e., high resistance or open circuit, which would pin the gauge low.)
The terminal on the high-temp switch is THE WORST for on a boat. They make a switch that has a 1/4" quick disconnect terminal (which is only one step above -- I haven't found a screw terminal switch yet.)