Now im not really a electronics super star or anything, so while I understand it in my own head, this will prolly be quite difficult for me to explain.
As far as Temperature senders go there are two types, or at least two main types. Ones that use one wire only, and ones that use two wires. The ones that use only one wire (like the ones that come with the cheap "Dragon gauge" available cheaply from eBay) must be installed into earthed metal. Where as the ones that use two wires can be installed into plastic, or rubber and can installed in metal so long as it has a plastic thread or the inner parts that resistance is measure from is insulated from the thread.
The reason for this is how the little computer circuits inside the gauges calculate the temperature. They do it by measuring the resistance of the metal of the sensor/sender then comparing it against the cars chassis voltage. (its a little more complicated but ill try keep it simple for now).
Since resistance increases within metal as it gets hotter, the computer reads the resistance of the Sender / sensors circuit and then compares it against the voltage of the cars battery / chassis (usually through the circuit that powers the illumination and circuit board of the gauge) and then adjusts it depending on your cars voltage and gives you a temperature reading on your gauge. So while the Neg and pos power wires, power the circuit and illumination of the gauge, the little computer inside uses them for a reference voltage too.
Some gauges also need the chassis of the gauge to be earthed as well, or at least that metal bracket at the back, though im not sure why that is. So in order for this little computer to get a resistance reading it needs a circuit and if the single wire type senders/sensors are in plastic or have Teflon around them there wont be a complete circuit, but will if installed in metal that is itself earthed to the chassis somehow.
The senders / sensors with two wires basically supply their own earth and can therefore be plugged into plastic or metal. Those ones are usually are made from a mixture of plastics and metal, and the single wire ones are usually all metal. Usually brass.
In case your wondering if the wires being used in the circuit themselves being heated or cooled can affect the reading of the gauge then you are Right, it can, but clever programmers and engineers write algorithms the compensate for these kinds of things. In order for the temp to be 100% accurate +/- 1% then everything from the length of wire to the thickness of the wire must be known and the circuit and programming adjusted accordingly. But dont worry about that, as they are usually accurate to between 1 and 4 degrees anyway, so long as they are earthed properly.
So summing up. Single wire senders / sensors must be earthed, so they cannot be used in plastic or rubber, and you cant use Teflon to seal the thread. I dont know what you use though either if there is not a perfect fit.
Two wire Senders / Sensors Dont need to be earth into what ever you are installing as they have they're own earth wire. You'll need to check with the manufacturer of your particular type, but so long as their thread is insulated (which it usually is) you can install it in to metal, otherwise plastic only.
***AN IDEA*** Here's an idea for single wire ones in to plastic: I have never tried this, but I am looking like I might have to very soon. But perhaps you could install a single wire type sender / sensor into plastic, then attach (by soldering or using a very tiny hose clamp or something) an earth wire to the outside of the Senders housing, therefore giving the gauge a complete circuit for the little computer inside to measure from. Now I can't guarantee what sort of Accuracy you will get, but its an idea and I hope it bloody works.
I have purchased one of those "dragon Gauge" brand Gauges of of eBay from a Chinese Supplier for just $14 Au with $9.00 Postage. It is cheaply made, plastic casing, but looks really nice when powered up. It has a smoked lens, as in you cant see anything until its powered up, then when powered you can see the Three, Blue 8 segment LED display it uses to display the temperature. Once I have installed this sucker I'll get back to you all on how well its worked. They have other gauges for sale, such as Oil temp and pressure. Air/Fuel, Exhaust Gas Temp, Vacuum, boost, tachometer & voltage and I think that's it. So While they are cheaply made, im told they are reasonably accurate and I can tell you they look fantastic. So ill be happy if I can get it to work. As you can probably tell, today I have a crap load of time on my hands. I hope this Short Novel has helped some one LOL.