1. Instrument clusters (temp readings) are slow and I would say not very reliable due to lag.
2. In 540I as I can recall you have a switch sensor and coolant sensor in rear and in radiator. All 3 sensors are exposed to coolant.
3. This is pretty simple, take a coolant sensor and splice the wires, all coolant sensors have Ohm spec that represents temperature state once it reaches certain Ohm you can sound the buzzer. I would avoid doing anything directly with cluster because of lag problems.
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