Fuel sending units generally have a two wire hook up. One to ground and the other to the back of your gauge. If your's has one wire, then the sending unit is a self-grounding type, which works in metal tanks or must have a wire connected to ground from the mounting point of the unit.
Most sending uints for fuel (and otherwise) are operated on the principle of resistance, which directly dictates the amount of movement on the gauge, or in your case, which lights come on. For example, many Ford fuel sending units will operate from 0-90 OHMS (measured with a continuity/voltage tester) and are either wired for 0 at empty or 90 at empty.
To test your sending unit, you can remove it and hook up the two leads of your continuity tester to the hot and ground side of the sending unit, set tester at OHMS, and physically move the float up and down to see the reading. There should be a low number, somehwere around 0-10 ohms, and a high number, which will be near 90, 250, or some other number depending on manufacture specs. The main idea is that the OHMS number should change steadily from empty to full. Check your numbers a few times, and be sure that you get a consistent reading. Also make sure your sending unit is disconnected from the tractor's wiring harness, otherwise you will be reading the resistance through the gauge on the dash at the same time.
As for the gauge, hooking up a poteniometer will work well if you connect it to the back of the gauge where the sending unit hooks up, hooking the other side back to the ground at the battery. This completely takes place of the sending unit when used like this.
Good luck, I'd like to see that work for you!
Rob