Besides the in and out holes, there's another hole in the middle for the sensor. The little plug between the two hose barbs in the picture goes in that hole if you don't put a sender in there.
I don't even have my gauge installed yet, but I've heard that the pan isn't a good place for the sender. The large volume of ATF in the pan has a lot of mass, so it will take a while to all heat up. If your sender isn't near the hottest part, it will take a long time to see that heat. The fluid leaving the transmission should be the hottest point...