A/C blows but not cold air....the temperature reading is off...but then sometimes the temperature reading is fine and the air works

Yes I am find to drive

Sounds like the blend door motor isn't working.

Check engine temperature, fan operation and thermostat.
Also check inside blower operation. If intermittent, then check and/or change the blower motor.

check to see if both hoses are hot going to your heater core if they are then core is fine.That would point to your temperature sensor.

You may have air trapped in the lines to or from the heater core.
If you (still) have a real radiator cap on the radiator, remove it with a cold engine, start and run the engine allowing it to warm up while watching the water/coolant level. Make sure the heater control is set to its highest heat setting while doing this. If it is trapped air, you may see it 'belch' after the engine is warm and the engine thermostat is open. Refill as needed if this is the case.
It's more difficult without direct radiator access and may require several cycles of hot/cold to allow refilling through the overflow.

Check to make sure it is full of coolant, if it is then the motor that controls the blend door is bad or stuck.

The HVAC controls could also be the problem.

HI, i have a 2000 323i and it sounds like we have a similar problem. my a/c works fine when the blower is going but some times it goes out of control and it's almost like it has a mind of it's own. and sometimes i turn off the car and the blower keeps blowing air even if the car is completely off and the keys are out.
I'm replacing the blower resistor to fix that. i was at the delaer today and spoke to a mechanic and its a common problem on the final stage blower resistor. you have to reach the blower to replace it but its easyer that it sounds.

Good luck

Sounds like a compressor problem.

put some frion in and change out the antifreeze

sounds like you have a bad temperature sensor in dash or the cable has eitehr broken or come off the heater switch under the dash!!