It sounds like the heater core could be leaking. When the coolant level gets low enough, circulation ceases resulting in overheating and excessive pressure leading to spray from the overflow reservoir. Use a cooling system pressure tester to pressurize the system, then look for signs of leakage. If your car has air conditioning, there will be a drip pan under the heater core. Leaking coolant from the heater core will drain onto the ground between and behind the front tires. If your car doesn't have air conditioning, the coolant will drip onto the passenger front floor.
The fluctuating temperature gauge can also be attributed to low coolant level. The sending unit responds to hot liquid, not very well to hot air.
Wednesday, February 10th, 2010 AT 2:19 AM