Question: Will you hurt anything by pressure washing the rad while still on the bike?
Answer: yes, the fan will get damaged
Question: Should I change the filler cap seals or thermostat?
Answer: No to the filler cap seals if you see the levels in the overflow tank vary between cold and hot. As for the thermostat, remove it from its housing and drop into a pot of boiling water. If it opens, then its working. If it does not open, replace.
Question: Is the temp light working?
Answer: Pull the temp relay, turn on ignition and ground Pin #A3. You will get the indicator to light. If it doesn't bulb is burnt out in the dash.
Question: Is my gauge working correctly?
Answer: No. It should switch functions at the following points in its travel across the scale as follows - white is where temp gauge rests normally, red is where fan should come on, red zone is where over temp light should illuminate:
Your's doesn't so its not calibrated to the actual temperature. The temperature response curve of the temp sensor is as follows:
So, the fan will cut in at 103*C. The indicator light will light at 112*C. Take Martin's advice and use a calibrated temperature measuring device to understand where things are operating on your bike. Then you have a baseline to understand if you have a bad sensor, bad gauge, bad thermostat, or what ever.
In fact, have a good read over this document:
http://www.ibmwr.org/ktech/fan-diagnosis.shtml