I bought a BMW 318i and the engine overheated twice so far while the coolant temperature sensor is normal. If we exclude the possibility that the sensor is malfunctioning, what problem would cause the sensor to read a normal temperature? I have been told that the sensor would be normal if you have a water leakage in the engine.
Thanks in advance.
I would suggest that you don't have an overheating problem, but that you need a new radiator cap. If the current radiator cap doesn't keep the pressure in, it will do as you describe. The pressure will be allowed to escape and you'll see steam and it will appear to be overheating, even though the temperature gauge appears to be normal.
If it's not the cap, I fear your cylinder head gasket is broken. Especially if you see smoke, not steam.
Run the engine stationary without the cap off and see if you have bubbles coming up. Disclaimer: don't remove the cap when the engine is already hot.
It could be something as simple as air trapped in the system. Another issue I've seen personally on a BMW E36 was that the viscous coupling to which the radiator fan is attached failed and the car would overheat when sat in traffic.
Make sure that when you fill the coolant system, you have the HVAC controls set to HOT and you "burp" the system. Typically allowing the car to idle cold with the radiator cap off whilst squeezing the bottom hose. Be careful not the overfill the system as this can also cause air locks.
If you're sure that the system is properly filled, checking the viscous coupling is working would be my next port of call. This link contains a pretty detailed how-to. I would say that this would probably show up on the temp gauge.
