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The hose (yellow) is oil fumes coming off the valve train. Some, like me, extend this hose till it just hangs below the motor and let the air, moving through the engine compartment draft it out. Others, rig up their own attachment and run it to the airfilter (on the top carb) to be burned in the motor. The terminal, in the inset red square, is indeed the temp guage sender. As for the other wire, with just what you have described, it sounds like the positive coil wire, or a splice off of it and you're grounding it, therefore shuting off the car.
