You said you replaced the thermostat, but you 'may' still have a problem there. The fact that you get heat at all is a good thing. What's better, is that the temperature gauge shows hot then goes back down when she starts blowing cold air. This tells me that the thermostat is cycling. To confirm if the thermostat is still the problem, try the following.
1 - Make sure your coolant level is topped up.
2 - Let her cool down.
3 - Take the rad cap off, start her up and place a newspaper in front of the radiator.
4 - Take a look in the rad filler and try to see if the coolant is moving around. It shouldn't be at this point as the thermostat should be closed. If it is, something is holding the thermostat diaphram open. It could be crud caught between the diaphram and the housing, or a bad bimetalic spring in the thermostat housing.
5 - Nowlet her get hot...but NOT too hot and remove the newspaper

6 - When gets up to what should be the operating temperature, take a peek inside the rad filler again and see if the coolant is moving around. If so, you know the thermostat is 'at least' opening and your water pump is doing its job. NOTE: DO NOT turn the engine off without first replacing the rad cap or it will boil over.
7 - Now take a look at the gauge and see if it's reading hot. If not, It would likely be the temperature sending unit or the connection to the gauge itself.
Another possibility, although less common, is an air lock in the cooling system. A large bubble will cause the sensor to alternate from hot to cool and cause the thermostat to close suddenly.
Let me know how it works out