1999, XJ Limited.
I just bought it, put a new oil pan gasket, and a rear main seal in it. While I had it on jack stands I decided to put a RE 3.5".. everything goes ok but I had just reached highway speeds (w/ traffic 40-45mph) and a sudden temperature spike to +- 250 degrees, then normal.
Thought it was a fluke because I only noticed it due to the check gauges chime. Then it happened again... and again. Each time its only once and short.
So I flushed and cleaned the lines last night drained downhill/ filled uphill, and added new coolant/anti, squeezed the upper radiator hose while running at temp to get the air out of the system. now I am confident I did an ok job getting the air out.. (heat on full, running at temp)... AUX fan on.
Everything was normal when sitting still in the driveway.. I have no idea where to go next aside from Thermostat... but its actuating normal every time, aside from the 4 times I have had this issue???

 

If it continues and the temperature spike ONLY happens for a millisecond and then goes back to original temps, this could be electrical in nature.

A primary suspect is the coolant temp. sensor that provides the input data to both the computer and the dash gauge. It is located on the thermostat housing.

 

I had the same issue, replaced temp sending unit and it was cured, fwiw.

 

Also, just a note... when the temp reaches 225° F the computer pegs the temp gauge to the max and the "check gauges" light comes on. They do that so you go into a panic and pull over to cool off before major damage is done.

I didn't believe it at first. But I have my clutch fan out, prepping for a Taurus electric fan, and I unplugged my stock electric fan. Sure enough, got to 225° and pegged the temp gauge.