Yeah that does sound like head gasket, did you notice it start smoking when it was at a high temp? You'll need to get the head re-surfaced and depending on what the head was bolted down with it's a good idea to get a set of ARP head studs as a bit of added insurance. With a set of ARP head studs and a genuine nissan head gasket you'll be sealed up well.
As for whats causing the temp fluctuations... that's a tough one. Are you using an engine fan or thermo? I'm guessing the condition of the coolant that came out was good so we can rule out blocked water galleries and/or radiator... am i right?
Who installed the thermostat and did the coolant flush, was the system bled properly?