This is some information from my friend John in Oz , who owns 2 Series 1 4/4s and know more than most about this particular breed.
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It's almost impossible to trace something like this without seeing the car, but there are a few things you might pass on to him possibly.
First, the temperature gauge is the capillary/bulb type and is independent of the electrical circuit. It will even register when out of the car (mine once registered 50 degrees in my garage on a sweltering day when it was out for something or other). They are generally fairly accurate.
Next, running temperature for these vehicles is normally around 95 to 98 degrees C. It may register a bit higher just with water as a coolant than with an ethylene/glycol antifreeze mixture, not because it's running cooler with the latter but because water is more efficient at heat transfer if you can follow the "Irish". Unless there's a problem with cold weather and the danger of freezing it's best to run with pure water with a bit of inhibitor added.
But the level of water in the radiator has a big effect on cooling. The overflow pipe has a T junction on its end with a spring loaded ball valve in it. The system operates on around 2PSI pressure. The radiator should never be filled right up, but only to just under the bottom of the T valve. This will put the water level around 2" below the top of the radiator cap. If you fill to the top the car will run quite a bit hotter. Given his mechanic added water this may be a cause but it should have started to settle down by now if he has been driving the car.
These are all the simple things. Given it was running OK before, the only other suggestion I can make, seeing the distributor has been removed, is the timing. It should be set to TDC at rest. There's an arrow on the flywheel to assist this, but as there is no cut-out in the top of the bell housing to see this (unless someone has added one) it can't be done on 1 or 4 cylinders. (You have to line it up at the bottom through the drain hole and do it on 2 or 3). This won't be needed as it's running, but he should do it by road test, i.e. pulling away from a fairly low speed in top and gradually adjusting the distributor until the engine is just pinking then ease off the smallest amount. Even when set at TDC resting this should be done.
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Good luck and I hope this helps.
