Sweet, as a meteorological person, I work with thermometers all the time. Either the old fashioned mercurial read yourself ones, or electric ones. The electric ones read to 0.1 degree C (we scraped into the 20th century in 1976 and Metricated) and update every minute. There is something wrong with your setup, and it would seem to be electrical (very slow changes/updates). The only other thing which would give you these results are exposure: the sensor must be "exposed" properly, and not attached to a large metal or water-filled object.
I had, on another car, a simple, cheap outside temp guage with the sensor attached (with a sticky backing) to the grille near the intercooler. As I could readily check it by looking at it as I arrived at work and then glancing at the wall readout of actual air temp once inside the office, it was accurate to within 0.2 degrees C, similar to the tolerance of our own instruments! Obviously it would suffer from heatsoak if the car was moving slowly or parked (as I was in a constantly hot climate at the time 55 C wasn't unusual).
So if your temp gauge isn't reacting to temp changes, I'd suggest the actual sensor would be a good place to start looking, rather than the gauge itself.