I had the same problem but it wasn't a voltage drop. My original sender was drilled/tapped into the sump and installed with teflon tape on the threads which probably screwed up the ground (VDO says NOT to use sealants when installing senders).
I bought a VDO dipstick sender; it is adjustable for depth in the crankcase and can be bent to clear the alternator housing, etc. I used the original wire and the gauge read perfectly (the dipstick sender also requires a separate ground wire).