That's actually an early DG water system and that sensor is a thermic switch, it controls the amount of time the manifold heater is on and the carburettor heater is on, connect one side to the positive side of your coil and the other side to the red manifold heater and the round black heater at the front of the Pierburg carb, all other wires from the petrol shuoff valve and the choke should go to positive on the coil.
Hope this helps.
Steve Shaw
Club80-90 Founder Member
Full Service, LPG conversions, Security and Camper Accessories.
see http://www.gasure.co.uk for full details.
01244 659740
it actually controls the relay that switches the carb heater, dont misunderstand steves post above, and connect the thick red carb heater wire to it, or it will be not a switch anymore!
the temp switch is fitted to carb models for manifold heating, the temp switch controls a manifold preheater relay supplying a live feed to the manifold heating element when coolant temp is below 55 degree's C. so if the switch is left unconnected the manifold preheater will never energise