Replacing the fuel temperature sensor and top injection pump seal
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Introduction

The ecu reads the fuel temperature sensor to adjust the amount of fuel injected.  When the fuel is warm, it is less dense and burns more readily, so the ecu injects more fuel to get the same mass of fuel and retards the timing.  When the fuel is cold, it is more dense so the ecu injects less fuel and advances the timing.  Hot fuel has the same effect as higher cetane fuel at a lower temperature because it burns more readily.  Note that timing and injection quantity is also based on many other factors, fuel temperature is just one of them.   

If this sensor fails, it will set a check engine light (aka. DTC/MIL/CEL) and the sensor will show a temperature of -5oC.  Because this is a nonsense reading, the ecu will use a "fall back" map setting so fuel economy and engine operation is only slightly affected.  A dealership will tell you that the entire injection pump is bad and needs to be replaced, this one sensor is actually user serviceable.  Why not just ignore the light?  The check engine light will result in emissions test failure in many states that have emissions testing, and the engine will not inject the correct amount of fuel.  The car is still safely drivable, but your fuel will be slightly off peak economy.

The top cover for the injection pump can also leak, this article shows how to replace it.

Parts (click links to see current prices and stock)

multimeter (optional)
triangle security socket (triangular injection pump socket) Bosch PN# "0-986-612-605" from worldimpex.com OR Metalnerd OR TDIparts.com OR KermaTDI (these are cheaper and just as good as the Bosch part) 
torx bit -T30 and T10

fuel temp sensor - bosch PN# "2 464 509 015-001" OR VW #"028 906 040 c"   (note - the fuel temp sensor is the same for all 1996-2003 VW diesels) from worldimpex.com or dieselgeek.com 
injection pump top cover seal - bosch PN# "2 461 015  008-000" OR VW #"028 130 717 a" dieselgeek.com or worldimpex.com

Procedure

First clean the area around the injection pump cover.  You don't want debris entering the sensitive area of the injection pump.  Make sure the engine bay is cold and have a fire extinguisher in your workspace.  Make sure all combustible fumes are exhausted from the area and do not introduce any ignition sources or sparks while working on the fuel system.  I also suggest wearing gloves to keep diesel fuel off your hands.

Wad some paper towels behind the injection pump.  The pump is normally tilted backwards so you only have to stuff paper towels behind and to the side of the pump.  Remove the injector fuel return line and wrap with a paper towel to catch any spilled fuel - note that the fuel system should normally not be under pressure in cars that use the Bosch injection pump since there is no other fuel pump.  Remove the T30 bolts x3 and triangle security bolt x1 with the triangle socket.  The injection pump cover should easily come off, be prepared for about 0.25 cup of fuel to spill out.  You don't want the fuel on the coolant lines or any other rubber hoses so make sure the paper towels are stuffed behind the pump!

Unscrew the fuel temp sensor (T10 x 2 screws) and replace.  It's the black thermistor, the thing that looks like it's holding a pill.  I don't know the exact torque for the T10 screws, but 3-4 lbs should be more than enough, the T10 screws are very small and LIGHT hand tight is more than enough force.  Any more and you will strip the torx head.  The sensor will only fit well one way, number should face up.

You can also check the resistance of the fuel temp sensor and compare it to the old sensor.  It should be about 1300-1800 ohms at room temperature.  Note that with the ignition on, one side gets 5V and goes to the ecu, the other side is ground.  Also inspect for unusual wear or dirt in the injection pump area.  It should be very clean with no visible wear.  Inspect for bubbles or specks in the electronics and plastic - there should be none.

Installation is the reverse of removal.  If you decided to damage the triangle head bolt by hammering a socket onto it to remove it, here are some specs on the bolts.

 

 

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