Check Engine Light

SOURCE: 1997 subaru outback legacy overheating

If the cooling system pressurizes BEFORE the engine even gets hot, you have the head gasket problem.
It is a known issue with this year and 2.5L motors
I am actually pulling a motor right now to replace the haed gaskets, I own two 97 subarus with 2.5L and have had to do both head gaskets now

SOURCE: 93 subaru legacy gt

Check The Vehicle Speed Sensors.

The Legacy has 2 Vehicle Speed Sensors (VSS): VSS1 is located inside of the transaxle; VSS2 is located in the combination meter assembly.

VSS1

1. Disconnect the electrical harness from the transaxle.
2. Connect an ohmmeter across the transaxle's electrical harness terminals 9 and 16.
3. The resistance should be 450-650 ohms.
4. After testing, reconnect the electrical harness.

1. Remove the instrument cluster from the instrument panel.
2. Disconnect the electrical connectors and the speedometer cable from the instrument cluster.
3. Connect an ohmmeter or continuity tester across the combination meter terminals 7 and 11.
4. Insert a small screwdriver in the speedometer cable drive socket.
5. Rotate the speedometer drive and note the continuity across the VSS terminal. Continuity should turn ON/OFF 4 times per speedometer drive revolution.

SOURCE: 1997 subaru outback legacy overheating

I've had the same problem all year. I've had four different mechanics look at this car - 97 legacy with 2.5. I've had the coolant seals replaced, the radiator cap, the thermostat, the water pump - all to no avail. I've realized now that it only overheats shortly after running sustained high rpm's. Recently the last mechanic mentioned the bleeder valve (I didn't know it had one and think maybe he didn't know either - not a subaru mechanic). Recently it overheated again (again sustained high rpm's - apparently more prone to produce air in the system), I sat the vehicle on an incline (raising the bleeder valve to be the highest point) and let the car warm up and run for half an hour. Now 300 miles and no overheat. I went through alot with this car to get to this point. Unbelievable.

SOURCE: 2003 Subaru Outback check engine light stays on

You may have to take it to a shop and have them connect their OBD tool to the computer and clear the deep memory. If you have a code left in the deep memory it can reapear like that. Good luck. Please rate me so I know how I'm doing. Thanks.

SOURCE: overheating

The 97-99 2.5L DOHC Subaru engines were notorious for this problem, blown head gasket is very likely the cause. It is possible to test for the presence of exhaust gas in the coolant to verify. The reason the car seems to be overheating then cools down quickly when shut off is that the hot exhaust gas displaces the coolant at the top of the engine where the sensor is. If it happens consistently you will need to deal with it, I have worked on an engine that was run many miles under this condition and it damaged the block beyond repair. If you are a decent shade-tree mechanic, it is possible to do the work with the engine still in the car, you will have to raise it up an inch or two to get sufficient access. I have personally done 3 engines with this problem, a 98 and 2 99's.