hiya,
here is the scenario, 2ltr engine, vdo oil sender unit, vdo guage...i start the car up , gauge shoots straight to around 40psi and hovers up and down as I'm driving in traffic. After around 20mins half hour of driving the gauge drops radically to zilch when i come to a stop and stay on idle. If I rev stationary it shoots back up to 30/40 then once off pedal it goes back to zero. My cylinder head temp doesn't alter at all.
I shut down, no oil leaks anywhere, oil level is good, oil looks clean on stick. Ohh and there is no oily smoke from exhaust , plenty of power through the gears. If i rest it for about 5 mins then restart and drive its back to normal until it repeats again

seriuously, WTF

is it

could it pressure relief valve

oil pump

oil filter block

pick up tube

this is what I'm thinking

how old is the engine how many Klms

What oil are you using

Oil pressure gauges are notoriously unreliable mate. My 1916 has been doing that exact scenario since new. The oil pressure light NEVER comes on whilst running though. That's the one I'd be concerned with. I think the rule of thumb was 10psi per thousand rpm at a certain oil temp. Mine has 50,000k's on it now too.

Put an accurate test gauge on the engine, oil pressure switches can vary between 3 PSI and 7 PSI, factory is around 2.5 PSI, always good to know.

As others mentioned what's your oil temp, oil weight, age of all components in engine? Al lot affects pressure your see as well as accuracy of gauge and sender.
The pressure switch will trigger earlier than most gauges will read, so low gauge and no light does not exactly mean the gauge is wrong either.

Oil pressure will be lowest at idle (oil pump putting out the lowest flow rate), so if you have a lot of (internal leakage) in the oil eg over the relief valves, cam followers, bearing clearance etc, this will be most noticeable at low revs when the pump could supply less oil that is leaking out which means low oil pressure.
Pressure is also very dependant on temperature, the higher the temp, the lower the pressure.

Looked up a few old links, not directly related, but might be worth a read.
http://forums.aussieveedubbers.com/viewtopic.php?tid=34649&page=1#pid299099 
http://forums.aussieveedubbers.com/viewtopic.php?tid=29925&page=1#pid245432 
http://forums.aussieveedubbers.com/viewtopic.php?tid=52238&page=1#pid489062 
http://forums.aussieveedubbers.com/viewtopic.php?tid=16946&page=1#pid123360 
http://forums.aussieveedubbers.com/viewtopic.php?tid=7051&page=1#pid53808 
http://forums.aussieveedubbers.com/viewtopic.php?tid=43313&page=1#pid402867