1) I'm not sure which wire is which, but I suggest you pick up a 12v circuit tester at your parts store (if you don't have one). The one I have is like a screwdriver with a pointy tip, a bulb in the handle and a wire with an alligator clip on the end. Unplug the pump motor wiring harness, clip the allegator clip to a good ground, and touch the pointed end of the tester on each of the wire leads (of course, the pump button needs to be activated as well). Once the light goes on, you've got the lead, and your pump is likely bad. If you can't get a light, then you'll have to start looking at the wire.
2) My temp sending unit on my '86 305 is located on the side of the block, driver's side, near the front (around the No. 1 cylinder, I think). But I think these can be in different locations, depending on the engine.
Good luck - I'm sure you'll get more help.
