I was having the same problem--replaced water pump and thermostat, and flushed system and put in new 50/50 coolant. It's running good now.

if you put in a 160 thermostat it will most likely make the fuel mix very rich and burn more fuel. My cousin get's 12 mpg with a 160, I get 15 mpg with a 195.

 

x2 the engine has to reach 195 for the comp. to go into closed loop and start reading the 02 sensor dont use any thing but a 195 t stat

 

yeah only 195 t-stats should go in there. im keeping my eyes on car-parts.com for the fan

 

So what is the optimal range for the XJ to sit at. My 95 cherokee sits at around 210, right in middle of the temp gauge, but off roading goes up a few hairs, but never to the red.

 

210 is normal. Some people have put in a switch to control the electric fan, so they can turn it on when they feel need to get some air flow to cool it down. Some have also put vents in the hood to let some heat escape. Some do both. I like the idea of a cowl hood, but it's expensive. It lets the heat out too. I just got a price of a fiberglass hood, installed and painted for $580.
It is important to make sure your coolant is good, and not old and muddy looking. I just changed mine, along with a new water pump and thermostat. Doing those 3 things at the same time made all the difference in the world for mine.
Just thinking out loud here, but on my 2000 the thermostat sits above the water pump. The temperature sensor is built in to the thermostat housing. So the temperature gauge is reading the coolant as it flows through the thermostat. If the coolant is old and has chemically broken down wouldn't do it's job very good. So there is nothing that's telling me what temperature is in the block, therefore it could be much hotter than it's supposed to be, compounded by a bad water pump not throwing coolant efficiently to all parts of the block. I think for anyone having issues with an XJ that runs hot the water pump, coolant and thermostat should be changed at the same time, along with flushing the system.

 

I must have flushed my radiator a dozen times. Still overheated. It was not until i replaced the radiator before it stopped overheating. I should have replaced the heater core also, but eh well I skipped on that one. Still have to flush the heater core out every now and then.

 

I was overheating on long drives, wheeling, drive thrus, etc. Flushed the radiator, changed t-stat, cleaned bugs out of the radiator. Nothing helped out all that much. Finally cut a couple big holes in the back of the hood and put some louvers in. Now I don't get past 210.