Mustanger69

Some good reading for the subject:

http://www.mustangandfords.com/how-to/interior-electrical/mump-1005-ford-mustang-instrument-panel-troubleshooting/
 

First thing do do is measure the actual oil pressure with a real mechanic's gauge (even one from Harbor Freight). If your oil pressure is truly low, stop driving and fix it.
If oil pressure is ok (and it sounds like maybe it is since you're driving it around) check your gauge and sender. The gauges on these cars are notoriously untrustworthy, and often old age and previous owners make them worse. There are some easy ways to test, you can google this and other Mustang sites for threads.
Do the gas and temperature gauges work ok?

Gas, temperature, and oil pressure all work off the same voltage regulator in the dash cluster. Since only the oil gauge is malfunctioning, it's probably not the cluster.
With the key on, if you unplug the wire at the sender and momentarily ground the plug to the engine block, the oil pressure gauge should peg to the H side. Only do this for a moment, don't leave it grounded very long!! If the gauge moves ok, you might need a new sender.
If it doesn't move ok, it might be your gauge or wiring that's bad 
Don't know why it would fog, unless something's getting hot? Stuff getting hot is never good.