I checked the FSM last night and did the procedures and it seems that the sensor is good.
Ok - now that you've gotten the FSM out, and you've followed the procedures to check the sensor, and it seems good, find the procedure to check the gauge, and follow that - if the gauge checks good, then the problem is most likely in the wiring.
Its a single wire so I can't see how its shorted to ground.
I can't see how

you can't see it's possible for a single wire to be shorted to ground - the chassis is ground, so anywhere the single wire comes close to the chassis, it can be shorted.
Since we're looking at FSMs, I pulled mine and checked, the sensor has it's highest resistance when cold, and it's lowest when hot, so if that wire were actually shorted to the chassis, it would peg the gauge.