Congrats on the Aftermarket Coolant Temperature Gauge installation, which works.
And yes, your engine is over cooling, which will rapidly grind the engine soon. I would assume the cylinder head gasket was doubled (stacked) on the engine, which contributes to the temperature gauge staying constantly on the blue zone, in addition with the locked mechanical fan.
What I would suggest you do is introduce thermostat in the cooling system (either 75° or 82° C opening thermostat, if the engine is XN1A). But if it’s XM7 or XN1, then 72 or 75° C thermostat is ok. It will, at least, keep the temperature probably above 70°C on the gauge once the engine warms up.
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If the engine is running to cool not up to the operating temperature it will make the car consume a little bit more fuel and oil circulation won't be efficient on cold start up, but for an old car like this no lele just fire on