I just bought an '88 Blue Bird All American RE with the CAT 3208.
Every 5 seconds or so, the gauges jump to the maximum reading and then drop back down to usual. I know the new Bluebirds do this once when the key is turned to the ON position, but my bus is doing it all the time. Any idea what it could be?
Also, after driving for about 30 mins the key is hot to touch. Is this normal, or is something shorting out?
No, it is not normal for the key switch to get hot. I would venture to guess you have a connection issue at the switch.
If connections get loose they will heat up and melt the connector and cause all kind of strange things to happen, just as you describe. At least it's a good starting point.