DV,
Yup it's a resistor, if you want to get technical it's a potentiometer. If you want to get real technical (and sufficiently nerdy) it's a rheostat. It’s a wire wound resistor, one end tied to ground, the other end floating, and with a wiper attached to the float. Since it has two ends it could be used as a potentiometer, but since it’s only using the wiper with reference to the ground, it’s a rheostat … now aren’t you sorry you asked!
The fuel gauge on my CR (using Autometer and CR sender) also bounces all over the place. Seems to be getting a little better with time. If it doesn’t smooth out I’ll probably experiment with a low-pass filter (nerdy technical term for a capacitor) at the gauge (simply because I’m too lazy to pull the tank).