Ford Excursion :: 2001 - Code P1299 - Cylinder Head Overtemp Protection Active

2001 EX 4WD 6.8l ... Just finished an engine rebuild and have a single DTC showing that I am having a problem isolating. In short: P1299 Cylinder Head Overtemp Protection Active. I have new sensors all around however. I have run a separate ground to the intake manifold to rule out bad ground. I have cleaned all ground connections otherwise. After clearing codes and start from cold, the issue does not occur until the engine warms up. I was seeing temps over 250 F on my scantool.

I pulled the thermostat and ran from cold... took a lot longer, but the condition eventually occurred. Scantool shows temp of 255.2 when protection kicked in. However, the engine, radiator, intake manifold all just slightly warm to the touch, barely no heat coming through the HVAC system. So, I do believe I had a new bad thermostat in the mix, but why do I still throw a code for the high temp. Temp gauge sits at Cold the whole time. Here's the catch, if I disconnect only the air coolant temp sensor, the problem does not occur, the engine runs like a kitten.

Key On, Engine off, the coolant temp gauge goes right to Hot and stays there. When the problem first started, the coolant temp gauge started going back and forth between Cold and Hot repeatedly. I have replaced that particular sensor twice to rule out a new bad sensor. Key on, engine off; with new sensor reads 185 ECT temp. Original sensor read 318, first replacement read 257. This third sensor is the only one that actually registers changing temperatures.