Temperature gage has fluctuates between 100 and 260, the water is full and fan seems to be working ok, and all belts seems to be ok.

The fluxuation in temp is from air bubbles in the coolant. As the air bubbles go through the system, it heats up (because if there is air then there is no coolant.) The way to fix this problem is by "burping" the coolant system. Basically, you want take off the radiator cap WHEN THE ENGINE IS COLD. Don't do it if the engine is even slightly hot, and NEVER do it if the radiator cap is hot. With the radiator cap off, start the car. As the car runs and heats up, the coolant will begin to flow through the system. This will make the air bubble also flow through the system. Once the bubble (or sometimes bubbles) reach the open radiator they will "pop." Don't burp it for too long though, eventually the coolant will overflow from the radiator. Once you see the bubbles coming to the surface, only do it for about 2-3 minutes. Once you've done that, put the cap back on and it should be back to regular operation. You might want to check the coolant level, if you need more, put it in the resevior. When you pour the coolant into the resevior, turn the container on it's side so it doesn't make that "chugging" effect, this could cause more air bubbles.

You need to verify that the gage is accurate, if it is then the cause is the thermostat, but check the gage first, a repair shop can do this or you can feel the air coming off the radiator fan, if it is really hot changing to cool rapidly then the T-Stat is sticking open.