I test drove a 98 Z with about 60k on the clock today, and noticed that even after 20 minutes of good driving on the freeway and around town, the temp gauge never got above about 60 degrees, or 1/4 the way up the temp gauge.

If I remember from my last Z28, it ran just a tick below 210 all the time!

What could be wrong with this car?

 

If your last Z was a 99 and up that's normal, 98's have an accurate gauge though - 60 sounds too low though. On a scanner the first mark on mine is 140.

 

I think he meant 160*...as mentioned above, 99+ had "dumby" temp guages on the dash. 160* is about right for a car running a cooler t-stat in the winter time.

 

Yes, 160... if it was halfway between 100 and 210, 160 would have been right.

Why would someone put a cooler thermostat in the car in a northwest climate? (coldest it gets here is freezing, around 30 degrees most winter days).

 

Northwest? Sounds like you are in western Washington. ;-)

A cooler thermostat typically allows the engine to take more timing (becuase risk of detonation is lowered), thus making more power. But, emissions are higher with a cooler temperature.

It is possible your car has been custom-programmed to run with a cooler thermostat. Hypertech typically recommends a 160F thermostat with their power programmer.