When you say you disconnected the 'plug' and checked it, are you saying you checked it with a meter? (ohmeter) It may have a reading, but you may have a problem with the float. I know someone who just recently went through everything (wiring, electrical, gauges) only to find out their float on the sending unit had some holes in it.
If you're not having problems with any of the other gauges, I would say it's worth checking the float out... if you are having problems with the other gauges then check this thread out:
http://fordsix.com/forum/viewtopic.php?t=18194
The float can be had by itself pretty cheap, you can even get it at your Ford dealer... But if you think the sending unit needs to be replaced, I would just get a whole new one.. they are very cheap for 65-68 Mustangs... I've seen then on Ebay (from Mustang vendors) in the $25-30 range, you could also check a lot of Mustang vendor catalogs... and it comes with the o ring seal, float, and sock filter. Most of the time after 30 years the sock filter is pretty much gone. I paid like $8-9 for the sock filter, and $3-4 for the float alone... So $25 for the whole drop in unit isn't all that bad.
There is the possiblity it is the wiring, so you want to elimate that possibility... one way is touch the sending unit wire (the one that plugs into the unit in the gas tank) to ground (a clean metal place on the car) and it should peg the gauge.. if not it may be the wiring or the gauge itself is bad...
