WED is pretty much on the money, but there is a bit more to it. There is the possibility that you'll read some resistance (Ohms) across the sender, meaning that it is sort of working. Also your float might be soaked or leaking (your readings are low, which could inidicate a low float), or the resistance is not correct due to corrosion, damage, etc. From what you've described I'd venture that the sending shaft is just gunked up and won't allow the float to travel full up.
Here's another recent thread in a similar vein, I posted here with a link on how to repair your sender ...
http://forums.luvtruck.com/viewtopic.ph ... highlight=
I got so sick of the sender in my old Rambler that I finally coated a fishing bobber with tank sealant and stuck it on the arm. I screwed the bobber to a small hose clamp, clamped it to the sender shaft and then just moved it up and down the shaft until I got it to read close to right. Only took 3 tries...haha...
Good luck
