The head temp sensor screws into the right-side head near the #3 spark plug wire. That's on a 2.0; on a 1.7 or 1.8, it's probably closer to the intake pipe than the plug.
This sensor tells the FI how hot the motor is; cooler motors need more fuel then warmed up ones.
Unplug the sensor from the wiring harness, and measure with an ohmmeter from the connector to the (-) battery post. The resistance when the engine is cold should be somewhere between 1500 and 2500 ohms. When the engine is warmed up, the resistance should be low--somewhere less than 100, most likely. Too high a resistance will make for too rich a mixture, and the engine will try to die when warm.
Check Kjell Nelin's article on the 914 Fan Page website:
http://www.914fan.net . It has a lot of good tests and explanations of the stock D-jet FI system. If you have a 1.8, the Haynes manual has a bunch of tests you can do to the FI parts. If you hvae carbs, check into one of the carb books.
Good luck!
--DD