Sudden temp gauge fluctuations

Haven't posted much for quite a while here, my rig has been treating me pretty good but on the weekend I developed a problem.
My rig is a 1990 cherokee, 4l AW4.
I completely removed the mechanical fan and I am running 2 side by side small electric fans in a custom shroud, on manual switches.
For years now, I can run down the highway at 90/100 kmh with no fan on, even when going up hills. For most slower driving that needs additional airflow, 1 fan is sufficient and if I ever turn on both fans the temp easily and quickly drops below 100 C.

My temp gauge has been rock solid all the time - starts at zero on start up, climbs to just over 100, drops a bit when the t-stat opens then climbs up to right around 100 again.

Last Saturday I was coming up a long local hill which I can take at 80kmh with the trans switching between 2nd and 3rd gear as the grade changes. I was in 2nd gear, about 3500 rpm, 80kmh, both fans on, temp at about 105 and the temp needle jumps up to about 120. I keep an eye on the gauge and it jumped just as I was looking at it. I pulled over, kept the rpm up and it slowly came back down to about 105 then jumped up again and kept repeating this. Coming down the other side of the hill I had both fans on and basically coasting down and the temp dropped to well below 100.
On the flat at the bottom, as soon as I gave it some gas the temp rapidly climbed back up to 105, and as I climbed the final steep hill to my house it headed to 120 again.
Sunday morning I checked the oil dipstick - no coolant, and the level was correct. checked the coolant - nice and green, but down a bit - I added a couple of cups. Went for a test drive and the gauge acted as normal, noted when the tstat opened but after it got to operating temp I needed both fans to keep the temp around 100- 105 almost all the time.

My suspicion is that I have blown a head gasket from a combustion chamber to a cooling passage. When that cylinder fires, it superheats the coolant and that 'pool' of coolant then moves past the temp sensor which spikes the gauge. As it moves past, replaced by other coolant, the gauge comes back down. I think that having those 2 electric fans in the shroud has saved my bacon because they can actually keep up with the increased coolant temp.
Or, my water pump has calved?

I didn't have a chance to do any more diagnosis this weekend but definitely a compression test is in the cards for tonight.

Any other thoughts based on these symptoms?

Check your catalytic converter (clogged cats do funny things to the temp. Failing that, check the coolant for exhaust gases.

Catalytic converter? What's that? :nono::shhh::shhh::shhh:

I did some googling and those kits to check for exhaust in the coolant are not too pricey - we'll see what the compression test says and go from there.
Thanks for the input.

Whenever my XJ overheats it does the "quick spike" like you have seen. I believe this is pretty common. In my experience they don't rise slowly until overheat, they spike quickly.

Could be a couple of things.

1. Thermostat is going out.

2. Not enough pressure on the bottle.

3. Plugged heater bypass hose to the bottle.

oops - forgot to mention - I put in a 'regular' radiator a few years ago. I no longer have the pressurized expansion tank, the rad cap is right on the rad.

I removed the spark plugs last night and they all look really nice - lightly tanned, none stand out as having been steamed. Tried to do a compression test but I can't get my tester threaded into the hole tight enough to make a seal - grrr - what a stupid design! Going to see if I can find some sort of extension that can be threaded in the plug hole, then thread the tester onto the extension.

Ok, then consider replacing the rad cap and possibly the thermostat.

finally got time to do the compression test.
cold/dry engine - consistently around 100-105 in all cylinders except #1 which is at 65. I'm pulling the head as clearly there is something wrong in there - hopefully it is just the head gasket, but if it is more major than that I know someone with an 89 XJ that has a newer motor with only 160000 kms on it (compared to mine at 330,000) that I can get relatively cheap.