First the lube being low seems to be why the alarm sounded. Because of the color and low level I would keep a check on it was you may have a bad seal allowing it to leak out. I would crack the drain screw once in a while to see if the color changes again.
On the t-stat housing there is the temp sender for the gauge at the helm and a temp switch for the alarm. These are totally independent. I would reconnect the wire and see if the alarm sounds or not, may have been disconnected due to the switch being bad. You could also ohm the terminal to ground to see if it's open or closed, should be open unless the engine is overheating.
1997 2400 SCR
5.7 Vortec / Bravo 2