According to the 1986 VT700 Shadow Service manual, the switch should be an open circuit below 199 degrees, and the switch should close between 199 and 207F. The manual said that the switch is sensitive to rapid temperature changes and will not function correctly if the temperature changes quickly. They said not to just dunk it into boiling water and see what happens.
Also, it said not to submerge it in water. Rig it up so that the part that goes in the radiator is under water, but only up to the threads. Put it in a pan of room temperature water and put your ohm meter between the terminal and the housing. Make sure you have good electrical contact between the meter and the housing and that paint isn't acting like an insulator in any way. Then put the assemble on the stove, and bring the water up to boiling. Have a candy thermometer (or any thermometer that's fairly accurate and will register up to at least 230 degrees) in the pan also, and watch the temperature come up. You should show infinite ohms on your meter until you get somewhere between 199 and 207 degrees. Then the meter should show zero ohms (or at least no more than 3 or 4 if you have a digital meter!). In any case, the switch should switch on before the water starts to boil at 212 degrees! (or thereabout depending on your elevation.) Actually, if you're at really high elevation, it's possible that the water may start to boil below 207 degrees, and if it does, you may have to add something to the water to raise it's boiling point, but that's a whole other topic, so I'm not going to worry about it unless this happens to apply to you!
In any case, this ought to let you know if that switch is working or not!
--Justin