All systems I know of have a float in the tank. That's how the sender knows the level of the fuel. Your "jumpy" gauge is probably due to it's design. It's probably made like an analog ohmmeter where you get an instant reading. The original guage has a winding around a bimetal strip that acted like a little heater. The more the sender grounded it's wire, the more the guage would heat up and move the metal strip. The metal strip was attached to the needle on the gauge at one end which would give you the movement needed to give a reading. The heating and cooling of the gauge was gradual so it didn't jump around like some of the live aftermarket gauges.
