What are you measuring? Intake air is colder than coolant is colder than oil which is colder than exhaust gas. You have to pick one because there are several different temperatures that can be read. Personally, I think either oil temp (for turbo setups) or EGT gauges are the most useful. The car already comes with a water temp gauge, so don't waste your time. If you have a turbo setup with an intercooler, you could measure the air temp before and after the intercooler to see the efficiency of the intercooler. I personally wouldn't make one, but just save myself the hassle and buy an autometer one off ebay.

You have to send the wire through the firewall into the engine bay. I don't know what car yours is, but on mine there was a rubber grommet behind the clutch master cylinder that I poked the wire through with a screwdriver. It comes out underneath the fusebox and it works fine. I have an oil line, boost line, and power wires coming through and the rubber insulates the lines from "chaffing" on the firewall.