Robert, the point in the oil pan where you install the sending unit is where the oil is picked up and sent to the oil pump. So for anyone wanting to know the absolute peak temperature the oil reached, this won't tell them. Of course, unless you measure it directly at the hottest point in the engine (underside of the pistons where the oil is sprayed to cool them), there is no one perfect place to measure the temp. This location in the pan is what we call "close enough for government work" and will tell you what you need to know. It is also going to give you basically the same reading as what you are getting now with the sending unit in the feed line. I can't remember back that far, but I remember seeing the original instructions for that installation and what you have is what I remember seeing.
btw, there is a 90° bend in the passage in the oil pan, and that's why there is a hole and a plug (can't drill a 90° turn in the middle of a passage).
Jerry
In the attachment, the plug labeled in white is the one you use to mount the sending unit.