They are notorious for not working right. Mine will be pegged on E and have 5-6 gallons in it. The old style connector for the fuel pump and sending unit (at least on 4 doors) was prone to bad connections and heat problems. The replacement pumps usually come with a new style connector to splice on and fix that problem. A corroded ground can also cause faulty readings. The needle jumping is due to a lack of "buffering" in the stepper motor on the gauge. A common fix is to remove the needle and use a syringe to inject an oil back into the motor to calm it down. There are threads about that on here and across the web. Sunlit will likely be along shortly and can tell you more technical details about it. I can't remember if a high reading gas gauge is too much or not enough electrical resistance.