I didn't know all these replies were here till just now's email notice. The thermostat housing was cracked. Turns out the two temp sensors come preinstalled on the OEM replacement (the trusted Motorcraft brand). So it's a new temp sensor. I'm guessing that the sensor range for this sensor is different than the original. I'm thinking of getting a new sensor to see what happens. They didn't save the broken housing with the original temp sensors in it like I ask. All indications are that the water pump and thermostat is doing what it should. After many minutes from overnight cold start, the top water hose starts flowing and going hot. But the panel dial long before went to normal operating temp. But it holds at normal operating temp thereafter like things are fine. But that makes the dial untrustworthy now. It's more like a panel light now.
By the way, on the two temp sensors, they're both right next to each other on the thermostat housing right there on the front of the engine, and both are 2-wire on my Ranger (2001 4-cyc 2.5L). It must be the pre-2000 models that have a 1-wire sensor for the panel.) The two sensors have different color connector sockets - one for the computer, one just for the panel dial. They both have identical looking connectors except for a keying ridge in a slightly different position molded into the shape of the connector. So you can't swap them by accident like I thought. Just some useful info to know for someone else maybe.
I'll update when I try a new temp sensor and if it gets back to showing a realistic temp. I thought of the air pocket problem but doesn't seem that would cause this problem? It does have a heater bypass valve that I changed a year before. The vacuum relay on it and hose to it were broken. Hum, maybe I'll try turning on the heater on to complete the flow through the system! By the way, another interesting tip on that. If the heater bypass valve relay is broken or the vacuum hose to it is broken, the air recirculate door in the dash won't work anymore! It stays always open to outside air. That vacuum line to the heater bypass relay feeds off the same line as the air recirculate door. (They're independent functions, but that's where the line going to the bypass valve splits off from.) And you'll never know if it's broken! But there is a way to test for it! Run the engine with no-air setting or with max-A/C setting. That pulls the recirculate door closed. Now turn the engine off. In a moment you'll hear the recirculate door relase and move to open as the vacuum goes away. Since that same line goes to the heater bypass valve, it's a good test!
