Theres a common fault with peugeots where one of the earth straps breaks off causing symptoms similar to what you have described. Does the temp guage move when different things are switched on (heated rear screen, indicators etc)? If yes then its an easy fix, the part is only £5 (18" earth strap frm any motor factors).
However unless you're good with spanners you should get a mechanic to do it, it only takes 15 mins (if he charges you more than £20 he's at it).
Lift the bonnet, look down onto the gearbox for a thick black wire attached to a bolt (13mm), the wire should run from there over to the inner wing on the passenger side (another bolt 10mm or 13mm), If i'm right this wire will be broken at the gearbox end of it.
This info is only correct for this specific fault, if you are unsure in any way dont attempt to fix it on your own, let a mechanic look at it for you.
I fixed this exact fault on another peugeot in November and have done loads of them over the years.
hope this helps
Dont worry about the steam, but get this fault checked asap incase its something more serious.
Edit: Re - Gordon_Shrek - I didnt know it had been a recall on auto's, the ones I've done recently were on a 1.4 306 manual (1999) and 1.9 Dturbo 306 (1998) also manual, hovever the straps had snapped due to corrosion, not incorrrect fitment, cheers for the additional info mate.