Different coolant temperatures

Unless you know which one is correct you will have to substitute a 3rd sensor prove which one is good. You could use the oil temp sensor since they are all the same. You need to determine whether it is a gauge, wiring or sensor fault.

You could just connect a resistor from ground to each of the sensor wires and see if the gauges read the same. I can't remember what value you need, from memory something like 150 ohms gives about 100 degC.

Thank you Kevin.  The new sensor seems to have fixed the issue.

An apparent difference in cylinder head temperatures can be caused if a sensor is not making good conduct with the tip of its thermowell (i.e. the socket).  I would suggest that you can first test the sensors by removing both sensors from their sockets and dipping them into a thermos flask of boiling hot water.  You could check the readings on your CHT gauge against a thermometer.  They should be within 1 °C.  Pack the thermowells generously with heat-conducting paste.  Insert the sensors into their thermowells and make sure that the tip of each sensor makes good contact with the tip of the well. A small gap can cause the sensor to read a lower temperature.  Tighten the nuts to hold them securely.  Test run the engine.  Sometimes it can take two or three attempts to get the sensor seated properly. 

I'd like to mention that the temp sensors (VDO) have a tolerance of aprox. +/- 7%-8% in the range we need them. That to me seems a pretty wide range. If you compare 2 sensors, one +8% the other one -8%, based on lets say 120C, one may give you a low ~110C and the other one ~130C. Have tested three sensor in an oil bath and found the tolerances confirmed. The test has changed my view on temp readings quite a bit and I'd rather have a more accurate set up.

Regards

Peter