as the others stated...
That wire shouldn't split from one wire into 2 like that going to 2 sensors...
The way all the factory gauges work is like this: they have power going into the gauge (this is power inside the cab at the instrument cluster/gauge) then the sensor wire to the sensor. The sensor is a variable resistor to ground, this means that the sensor changes how easy it is to make a ground connection (for temp the hotter it gets the less resistance it has = easier to make/see ground connection) then the gauge reads this connection to ground and displays it as a proportion (less grounding = cold, more grounding = hot, in between = normal) . The gauge is calibrated to this variable resistance range if you take and short the wire to the sensor to the engine then the gauge should go to full HOT and with it not shorted (or connected to the sensors) then full COLD the readings in-between are where it has been calibrated with the correct sensor to the gauge for the engine temps ranges.
With what you have with 2 sensors connected together this variable resistance is less (closer to ground connection) then it should be with only 1 sensor (this is how electronics works with parallel circuits) so as the gauge "seems" to be working with both hooked up you either have 2 sensors that are not correct (wrong resistance range) or they are faulty, or your engine is running cooler then you think.
Having 2 sensors to operate the gauge is not the norm for this gauge on our trucks (don't know of anything that it is), even though it seems to work I wouldn't trust it, as you don't know which sensor is doing what... You would be better with a fixed resistance in parallel with 1 sensor so that you knew what the 1 sensor was doing.
So to some up:
You need to wire it up for 1 wire to 1 sensor. That Red/white striped wire to the sensor.
Get new sensor or confirm the operation of the sensors you have, this can be done with an Ohm gauge, thermometer, boiling water, and finding the specs on the sensor as to what the Ohms are at what temp (I think Robroy posted this on the site here)
After that it could be the gauge itself is not reading correctly, if correct sensor or confirmed sensor still doesn't read correct.
I tried to explain this without getting toooooo technical, hope everyone followed along ok