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Oil pressure will peg when cold because the oil is cold and much more viscous. Once it is warmed up, it will thin out and the pressure should be around 1.5 times the RPM reading. There is a pressure relief valve in the engine that pops above a certain pressure to prevent damage.
The oil level gauge will not register accurately until the oil is warm. With ~14 quarts of oil in the system it will expand quite a bit once it's warmed up. That is the reason you should only check your oil in the tank when the engine is warm, running and on level ground.
Your description of the gauge functions is quite normal. If you search on these topics there is a wealth of information detailing how they work.
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1981 SC ROW Coupe
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