So I was replacing the o2 sensor and thermostat on my 86 22re and found that the wire from what I assume is the temp sender??? is just cut. Can anyone tell me what this is/where I need to rewire it to?

 

This is the temp switch for the fuel pressure regulator vacuum switch. You'll find a loose wire coming out of the engine harness somewhere below the cold start injector between the intake and engine.

 

What does this do? I cant seem to find any loose wire and have been reading forums on these two connections on top of thermostat housing. Reading about some ac shut off switch for 4x4 and towing? Idk. Wondering how this not being hooked up is effecting my 4runner?

 

The forward temp switch in your picture is not the stock-factory AC cut off, trace the wire does it lead to the fender or the engine harness. If it leads to the engine harness loom it could be the TSW wire, does it match the color of the wire stub on the other?

TSW causes the FPU VSV to switch the vacuum port of the fuel pressure regulator to atmosphere, this gives you slightly higher fuel pressure for hot starts.

Ac-cut turns off the compressor if the water temp climbs above (what ever) threshold.

 

Some engines have that sensor on the water outlet and some do not. It may be that someone swapped that water outlet to your truck and cut the wire since it didn't go anywhere on your particular truck.