Your coolant temp sensor should be the standard Negative Temperature Coefficient thermistor type (resistance across single terminal and base varies with temperature; lower temp yields higher resistance). Looks like the part number is MD091056 and was used for about 20 years, from 1987 to 2007 (and is generally a simple, very reliable part). Here's how the sensor is supposed to be tested from the 2001 Pajero WSM, section 54A, pg 32 (same sensor as yours):



If you could find a resistance-temperature table for that part, you could test it without removal by heating the coolant and checking for correct resistance output.

PS: If you have rust issues, it could be that the connection with the base of the temp sensor has high resistance due to excessive rust. Taking it out, cleaning and sanding flat the mating surfaces may help.