Whether you put the heating on to drop the engine temp or not, it shouldn't make such a big difference in the engine temperature. The fact that it does points to a possible problem somewhere.
If the thermometer is knackered the car won't know how hot the engine is and neither will you. If the car thinks it is in range it won't put the fans on, but when you put the heating on inside the cab, you provide additional cooling to the engine by way of coolant transfer and fan(s), and so the temperature of the engine drops.
You could have an overheating problem but I admit the normal 85-90 you mention is about right. However it's worth noting that is only an indicated temperature, not what it actually is (a bit like the speedo).
It could be as simple as a dodgy electrical connection to the thermometer. I can't remember if this can be reached while the engine is assembled, but it's a spade connector that pushes onto the coolant transfer bridge at the back of the V on the engine.