If your speedometer is bouncing around, its the speedometer line. Im not really sure how to describe it, but your best bet is to go to SOGI's site and go into their tech tips for mk3's. They have how to fix the speedometer problem and the air bag sensor.
http://www.supras.com/06/main/index.php
Thats the sogi site, and these links:
http://www.supras.com/06/techcenter/display.php?QID=28
http://www.supras.com/06/techcenter/display.php?QID=52
Now im not entirely sure why the light comes on. Mine has been on since i bought the car, and i finally fixed it. There are other ways of fixing your speedometer problem too. One way i heard was using the syringe's (sp) out of a ink cartridge kit to fill it back with oil. It was on supraforums if it ever comes back online, you could try searching there.
Hope this helps