I understood that from the beginning. It was indicating hot, and understandable to exaggerate it as 'pegged,' whatever that means. If you had an air bubble in the cooling system, the air heats up more than coolant would, and air around the temp sensor could lead to the gauge indicating way hot. I don't know if air bubbles tend to find their way to temp sensors in LC100s, but its common in other cars.I think I owe an apology for using the word "pegged" incorrectly. During my last drive, it was at the very top and not moving, so I said "pegged." I've since cranked it twice to move it out of the garage and check AC levels and both time the temp gauge was normal. So it's not permanently "pegged."
I do think you've either lost some coolant, or the mechanic that did your heater Ts 1K mile didn't properly top it off or bleed it properly after he did that. The repair manual says to run it a little bit with heat on, then after it cools down, set it to the upper mark on the expansion tank (its a bit ambiguous here, but somewhere between low and full). I set mine at full, and found that it always drops a bit below the full mark when its fully cooled down. It never loses any though, and you shouldn't be down below the low mark.
Your mechanic may not bother to read the manual, though.