I never messed with an
oil temp sensor, but the water and air temp sensors are a resistive temp device (RTD). You can look up on the net a chart of temp verses ohms (for water and air). I would guess the
oil unit is the same as water, but be ware of assume. You really do not have to heat it to test it. It is at some temp right now and it should read some ohms that would match that temp.
Likewise you should be able to connect a known resistance to the wires to test the gauge and wires.
I'm not sure if they are designed to rely on engine ground to work. If one wire, it definitely is. Since you had the engine in/out, make sure you have a good ground. Also coating the threads with massive amounts of PTFE tape may insulate it from ground. So while your at it make sure the pan and sensor are grounded.