And if you disconnect and don't ground the wire, the gauge drops to the bottom of the scale with the ignition on? If so, wire is (should be) good. Gauge type sending unit is commonly referred to as "nail" type, it fits a slotted 1/4" connector.

Teflon tape may keep the sending unit from grounding properly, but in your case it appears the sending unit is permanently grounded. If you have an ohmmeter, test it by measuring terminal to thread resistance (disconnected). It should be more than zero ohms.