You can PWM drive the gauge with an N-channel MOSFET. I'm using a ground-switched output on my Haltech to do the same thing. That might make the circuit simpler for arduino use.

I connect a 200-ohm resistor between the gauge sender to ground, and then the low-side driver to the gauge/resistor junction. If there is a circuit disconnect the needle points around the "E" in fuel letting you know there is an Error. Your output D/C isn't linear to gauge reading but a 4-point correction curve will get it close enough. Use the highest PWM you can for smoothest gauge movement. Then you can use a second MOSFET to trigger the low-fuel light at whatever measured fuel level you like.

For a sender I'm using a Dorman 55818 with a 2-part 3d printed adapter to set it in the stock sender hole. It's easier (imo) than fiddling around with the fuel module float arm kinematic ship in a bottle puzzle.