I have heard about the pegging when installed backwards. I did a lot of testing of the gauge yesterday using a variable pot (15 turn 1k ohm precision for those wanting to know...Radio Shack $2.69) and have proven that the gauge is good.
I know that the sender is installed correctly but I am starting to wonder about the connection between the sender and the blue/white wire to the gauge. It may be a bad connection. As the resistance between the gauge and ground increases, the gauge goes up to 5 bars. In theory, a pegged gauge would have high/infinite resistance to ground which may be my problem.
When I drove to work today, I had normal pressure 4-5 bars for a few minutes then it pegged again. The good news is that after a 30 minute drive on the freeway, the engine didn't blow up or burn oil so I probably have ok oil pressure.
I'll check wiring again tonight when I get home.