It has a temperature sensor in the front of the engine at the water output for the EFI. That one is normal. But they put the sending unit for the temperature gauge down low next to the oil filter. This is where the cold water comes in. Why would they put it down there? The gauge sometimes moves back and forth as thermostat opens and closes. Maybe an after market thermostat opens and closes more quickly and makes this worse.
If the radiator became clogged inside and the water flow was restricted, would this result in the engine over heating while the temperature gauge wouldn’t show it because it is measuring the colder water that is coming in the bottom?
Is there a reason for putting it there?
I’m pretty sure that is your oil pressure sending unit.
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Whatever the reason is, since the car was made during the Wonderful 90’s it must be the best design ever! 
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Yeah, I’m thinking this is the oil pressure sensor as well.
Since this same basic engine has been around since 1970, the temp sensor was likely installed wherever they had an un-used hole into the water jacket. The early cars did not have fuel injection so they didn’t need a temp sensor to run, just to warn. The 1995 Fuel injected engine NEEDED a sensor but so did the gauge and the systems were not yet integrated sooo… 2 sensors were required. The best location was used for the engine controls. The 2nd best was for the gauge.
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My early 90’s Corolla has 5 gadgets that screw into the coolant jacket and measure the temperature. I expect Toyota designers just put them where they had a spot available.
- engine coolant temp sensor (used by computer to adjust air/fuel mixture)
- coolant temp sensor sender (for dashboard gauge)
- coolant temp vacuum (air)- switch (low brow version of evap purge valve)
- cold start thermo-time switch (controls the 5th injector, cold start fuel injector)
- there’s one more, but I don’t recall what it is for … lol … oh, just remember, temperature switch for turning the engine coolant fan on & off (this is the only one of the 5 I’ve had to replace)
Mitchell ProDemand lists the coolant temperature sending unit: "Left rear of engine above the oil pressure switch.
The coolant inlet is at the front of the engine, through the water pump.
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Wouldn’t the water come in the front down low and move along the bottom and rise to the top along each cylinder, and then move along the top to the front where it comes out again and goes to the radiator?
The coolant flows in a loop, so where the loop “starts” is ambiguous. I expect Nevada means by “coolant inlet” the location where the cooled coolant from the bottom of the radiator goes to the water pump inlet port.
I think on my Ford truck v8 the coolant path goes through the bottom part of the engine front to back, then turns around and goes through the top part of the engine back to front. On my Corolla the path starts at the front of the engine (right side of car), and goes through both the bottom and top of the engine front to back, exiting the engine at the rear. It makes its way from the rear of the engine back to the front of the engine via an external pipe than runs on the under-side of the intake manifold, difficult to access, called the “inlet pipe”.