Your heater didn't necessarily malfunction, the dial is probably wrong on it, I have an All Glass that came with a package I purchased and got used to the dial being wrong, I set it like you use to have to with the old ones, which is to look at your temp, if you want ot go higher, turn it on until the light comes on and let it run until the light turns off, repeat until you ge to your desired temp. Once I got to the temp I wanted, I have not had any temp swings.
As for your high temp, I noticed you are in Phoenix, I would imagine it is still way above 85 there. Where is your tank, does it sit next to awindow, what is the temp in the room where it sits?
26g of water will change temps allot faster than 55gal, so I am wondering if room temp is your problem. Also, are you running a UV
sterilizer or MH
lights? I am also thinking the return on the HOB
filter might allow the water to heat closer to ambient RT as well. Same theory as with the 26 gal
tank being easier to heat up than a 55gal. You have water sitting in a smaller tank (HOB
filter box) with a better chance of picking up heat than in the tank, and the thin film of water flowing, also has a chance to pick up heat. Usually not a problem for most folks, but in AZ might prove a problem if the room youhave the tank set in is above 80 or gets allot of sun.
Just spouting stuff off to try to save you from having to buy another heater just now.. Might want to check on some of those things.