The problem with the cheap mechanical gauges Franklin mentioned is that they are just that, cheap China-made junk. On ebay you can still find older (but new and never used) US-made gauges, they won't be white-faced with LED lighting and will look quite a bit dated, but I see them on tractors and combines all the time still chugging along after tens of years of use. That's what I run in my trucks, and yeah their backlighting sucks but it's nothing an externally mounted directional LED doesn't solve, and they are of much sturdier build than the cheap auto-part stuff. Plus in case of oil pressure gauges there is an actual NPT port on the back, which makes it ideal for running braided SS (aka turbo feed) line to it - cheap newer gauges have their port machined to accept plastic line directly, which IMO is about as dumb as it can get.
With towing you want a pyro more than a water temp gauge, even if your factory water temp gauge ain't the most accurate thing in the world (it actually is quite accurate tho, just gotta know how to read it) at least you already have it, while a pyro is not something the factory deemed necessary to install for us. That is the one gauge you wanna be spending $100 on tho, ISSPRO would be one to get if possible, another is the digital box by Auber Instruments with the built in recall and alarm features.
Digital vs. analog is a subjective decision, I like needles cause I drive a lot at night and I'm used to just glancing at the needles positions, I don't need to see exactly what number they are pointing at, if all are straight up (except pyro, speed, and tach obviously) all is good. On the other had if you have a shelf right below your roof feel free to line it up with digital Auber gauges, they'll be easy to see and read there even at daylight conditions.
Where to put the temp gauge, most go for the location Franklin described, pull the factory overtemp switch and stick the gauge sensor in its place. There are other locations as well, for instance towards the rear of the engine on top of it there is a port that was used by the glowplugs controller on the 6.9 trucks, that may be a good spot for a sensor. Actually can someone confirm for me whether coolant temps there are higher than those seen at the front of the engine? I'd like to have my overtemp switch operational again, and if it can be installed at a hotter location than factory that would be ideal as then my e-fans will kick in earlier (say 230F instead of 240F as measured at the front senors would be nice)