To confirm and clarify, the gauge pegging high suggests a short to ground somewhere on the wire between the gauge and the sender, if not in the sender itself. The sender works as a ground path to the block, with oil pressure applying a variable resistance between the gauge wire and block/ground. The idiot light switch (technically not a "sender", as it's either on or off, not sending a variable voltage signal) also works by closing a path to the block/ground; oil pressure holds this switch open, keeping the light off.
If the sender is faulty, it could be shorting straight to ground, pegging the gauge. The wire to the sender may also be disconnected and hanging loose somewhere it happens to be touching a ground, or the wire itself may have melted/abraded insulation somewhere it's touching a ground along its length. If you've swapped the wires to the gauge sender and light switch, or replaced a bad sender with a new switch, that would typically result in a pegged gauge when the engine's not running (w/ key on) and a dead gauge when it is.
Some setups may trigger the light when the gauge is pegged and/or peg the gauge when the light goes on, but I'm not sure offhand if this arrangement may apply to our trucks or not.
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