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So I'll try to explain my problem in as much detail as possible. The car's Holden Commodore VX SS with LS1/4L60E (think of it as a '04 GTO).
I recently discovered that the coolant temp sensor was broken, it was throwing a code (I didn't see the code myself, the mechanic did). So I found that the sensor itself broke where it attaches to the connector.
I changed the sensor and it worked fine, until it threw another check engine light, randomly stalls while driving or idling, the radiator fan kicks in even if the car was still cold and doesn't shut off, the temperature gauge increases and gives me a warning that it's too hot when it clearly isn't, and when it does that, I shut off the car and the fan is still turned on. I turn the car into the start position, then the fan shuts off and the temp gauge comes back to normal, but the check engine light is still on.
I discovered that the wire is severely damaged and badly scored due to heat.
Whenever I try to move this wire it stalls the car, hence the engine sometimes stalls while I'm driving too. Probably because the wind and vibrations are moving the wire around. And I uploaded a video demonstrating the issue.
BY THE WAY, the car NEVER takes that long to start or start this poorly, I do not know if this sensor is causing this to happen or something else, and I hope someone can chime in on the issue.
How can I fix this wire when it's part of the engine wiring harness? Isn't it too risky to hook up a new wire and connector? Or should I just buy a new engine wiring harness?
There are two wires on that pigtail/plug, but I only see one. If you can get a pigtail from another car and solder it to the wires that are there. You will need to remove the protective sleeve until you can see both wires and that's where you cut, solder and use heat sleeve to finish the repair. If not, you will need to cut and repair/solder new wires to the existing plug, so peel back the protective sleeve until you can see both wires. (Looks like that wire was touching the exhaust manifold/header and that's what caused the damage; be sure it doesn't do it again). This is what it looks like:
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Problem with Coolant temp sensor's connector 
