Its your gage man, I gurantee you that the engine is coming up to operating temps. Motion generates heat. And no cooling system in the world is going make your engine run that cold.
Pop the hood after driving, it should be hotter then hell under there. Also, let the car idle, once it reached 200F the fans will come on. You probably have a bad Coolant Temp sensor or the gage is faulty. Quite possible when a car is going on 16 years old.
As to you fuel effiency prolems? Check o2 sensor, get your TB cleaned, get your fuel lines and injectors professionally conditioned, check your plugs/wires, and use higher octane fuel. Do some experiments.