I had a similar problem once on my 86 extra-cab truck with 22re . The fix was a 2 stage thermostat . It is a thermostat that has 2 temp valves . You can buy it at the toyota stealership for about 40 dollars . part number 90916-03070 . What happens on the 22R and 22RE engine, when the coolant goes through the heater core it gets cooled off enough that when it gets dumped back in on top of the t-stat it shuts it. Therefore the temperature in the engine continues to go up. The t-stat that I have mentioned has two valves in it, one at the regular temp. and one smaller on at a cooler temp. If the cool water shuts the big one, the smaller one stays open. The overshooting/spiking temperature gauge may also appear independent of heater operation. Hope this helps .
