This may sound stupid, but I took all the fittings off the sender unit, including the bracket and cleaned all the sludge out. It works great now.
On a side note, hicketts, was Quaker State run in that motor. Over the years I have heard of that oil getting sludge on everything.
1991 YJ, rebuilt 4.0L in spring 2009 at 234,000 miles, no lift yet, slightly offset wheels, 235/75/15 tires for now, rag top, sold the hard top. Over 35,000 miles on the rebuild and counting.
2006 Jeep Liberty. Nothing special, all stock.