Twice now, I have been driving and my low coolant indicator on the DIC comes on. Right after it comes on, my temp guage starts dropping quickly (like, a degree every 10 seconds or so). In a minute or two, the coolant light goes off and the temp goes back to normal. Once back to normal, while I'm driving, it sits at about 138-141 F the whole time.

I have no idea what could cause this.

My only Guess...as your Thermostat opens up, the coolant level in the rad decreases for a short period of time, and this could be just enough to trip the low coolant light...
How full is your resivor/rad?

Yeah, something like matt said. Umm, i would say that you could possibly take off your rad cap when cold, and the level is normal...then run the engine until the stat opens. Then watch to see if the level drops.

No external leaks right?

Well, the resevoir was ok, but when I took of the rad cap I couldn't even see coolant (even when warm). So I took out my reservoir and it was all gunked up with crap. The previous owner of the car had changed the system to the green stuff instead of the dex, and there was what looked like a reddish/orange sludge buildup in there.

I flushed the resevoir with water until in became clean, hooked it back up and filled it up. No light as of yet...I took it for a drive and the rad sucked coolant out of the res. and it is flowing like normal again.

My primary concern is that my engine is ingesting coolant, so I am going to keep a VERY watchful eye on the resevoir. If a SII L67 is using coolant/it'* disappearing, what would be the culprit? The LIM gaskets?

Generally speaking, your Lim gaskets would be the culprit. Mine were just starting to leak when i tore into it.

Alright, well things are OK so far...

But I was also wondering. What temp should my coolant get up to? It won't go any higher then 140-150F, and that provides mediocre heat at best. It'* warm, but not great by any means...

Well then what'* the temp rating of the T-stat? I'd say that if it were a 195 T-stat, then you should be able to get up to 180 in the bitter cold and have plenty of heat.

Run it long enough to determine IF it'* using coolant. The gunk from unchanged dexcool? in the reserve tank may indicate problems with gunk in your heater.

Changing the thermostat if you don't know how long it'* been in is a good start to be sure engine is operating at 195. Then with motor warmed up and blower running on igh check both heater hoses. Both should be hot; if one is cool that means the coolant flow rate is low enough the blower air is sucking all the heat out of the metal in the heater and there'* not enough coolant to keep it warm hence the outflow is cool.