As above, the coolant gauge should read bang on 90 degrees in normal running with correct coolant level as the thermostat on these engines is designed to open at about 87 degrees if memory serves me correctly.....
I ran a '94 80 Avant TDi for a few years and when first acquired noticed that it wasn't going higher than about 70 degrees , even on the longest journey.
Changed the thermostat and all was back to normal, with normal running temp of 90.......
I'd recommend checking the coolant level, and if all is OK with no flashing light but with still cool running then change the thermostat. /ubbthreads/images/graemlins/wink.gif