Code 41 and dancing voltage gauge

I was going to suggest the same thing as Bob, either a problem with the field windings or a contact problem at the terminals. Here's why:
The alternator's job is to constantly feed current to the battery so that the battery voltage remains more or less constant. As the battery supplies current, its voltage drops, but the alternator is "filling" it back up. If you think about the battery as a bucket with a hole in the side near the bottom of it, you can see that water flowing out at some rate (analogous to current) will reduce the pressure of any water coming out afterwards (analogous to voltage), as there will be less water in the bucket to push the water out. Now, if you take a hose and put it in the bucket so that the flow going in is roughly equal to the flow coming out, the pressure will stay more or less the same. That hose is the alternator. Going back to the analogy, you can also see that you'll need some valve to control how much water (current) comes out of the hose so that the bucket doesn't overflow. That valve is the alternator field windings. By controlling how much current goes through the windings, the ECU can control the output current of the alternator. That's all fair and good until you consider that in some cases, you may only need a little current to keep the battery full, while under others, you'll need a lot. The alternator windings are split into two portions that the computer can switch on and off as needed. If there's a high demand, both windings will be "excited" (a "full-fielded" state), while if the demand is low, only one may be active, and even then not at full current.
If one of the windings can't activate because of a bad connection, or if neither of them are getting the full current because of a high-resistance connection, you'll get low current output and the battery voltage will fluctuate. Idle is a particularly bad time for an alternator, since it's not really spinning fast enough to produce much current unless it's full-fielded or close to it. If the battery has seen a high drain, like it does after starting, it will need all the current the alternator can supply. As you drive, RPM increases and the current output rises, so the battery can recharge even with the lower current in the field windings. Current demand also drops, so eventually the battery recharges and voltage stabilizes.
I always like to know a little bit about what's going on when I'm working on a problem, I find it helps me to tackle it easier. Hope this explanation helps.

Okay, so I had some time to play with this today. Unfortunately, it was behaving pretty well while I did so. I took all of the wires off of the alternator and cleaned the connectors, and checked the resistance between the big wire and the positive wire on the battery. The number was very low, almost 0. I still have some strange behavior, though:

With the car just idleing, no accessories running, voltage at battery as ~13.9 volts. The voltage gauge sits at the first line to the right of the middle of the gauge. On the alternator, the big wire that goes to the battery is at 13.9-14 volts. On other connector on the alternator, the top small one is at 13.9 volts, and the bottom one is at 10 volts.

With the car idleing and Rear Defrost, headlights, and full a/c fan, the battery voltage is ~13.8. The voltage gauge, however, is now sitting at the first line to the left of the middle. On the alternator, the big wire that goes to the battery is at 13.8 volts. On other connector on the alternator, the top small one is at 13.8 volts, and the bottom one is at 5-6 volts.

Does this make sense to anybody, that the battery voltage is the same but the voltage gauge in the car is different? I have to charge up my drill to remove the screws to remove the kick panel to get to the computer, so I was not able to check those connections yet.

Okay, I am 100% sure that it is a grounding problem now. As an experiment, I ran a 10 gauge wire from the negative terminal to the battery to the pivot bolt under the dash. I attached it there with a vice grip and guess what. Perfect voltage everywhere. Full fan, headlights, and rear defog and still 13.8 volts at the cigarette lighter. I also checked the voltage at the left headlight and had 13.8. As soon as I removed this wire, I was back to right around 12 volts at the cigarette lighter, and 11 volts at the headlight (no wonder they always seemed so dim). At this point, I thought of securing the nicely and leaving it, or doing the old car audio trick of running a piece of 4 or 0 gauge wire from the negative terminal to a body ground, but decided I wanted to actually fix this properly.

So, I started tearing by unplugging and checking every plug I could find, but everything looked clean. I took apart and cleaned up the grounds I could find. I cleaned/sanded the ground behind the battery tray, the ground strap from the engine to the firewall, and the big ground wire from the negative terminal to the engine. With a multitester, I am now at ~1ohm of resistance between the negative battery wire and any of those points, and about the same between the negative wire and the shock tower bolts. I then tore apart the interior to get to the ground under the left side trim panel. This was completely covered in corrosion and the area around it was rusting away, so I cleaned it up as good as I could, sanded the paint around the pivot bolt for the dash, and attached the ground to that bolt. However, I think there is another ground somewhere that needs to be cleaned.

I'm now at 12.6 volts at the headlight and at the cigarette lighter with fan, headlights, and rear defog running, so it is better, but still not the best. Can anybody think of another ground somewhere that I should clean? Or is the big wire to another body ground the best idea?

This thread will not die!!!!!

I was eventually able to convince autozone that my alternator did in fact die even though it is 18 months old. I have the replacement installed, so I think i am good with the code 41.

However, I am now at a loss about what to do about the voltage dropping when the headlights are on. After installing the new alternator, I did a check at the headlights and found 11.3 volts, even though the voltage at the battery is 14.0. Here is where it gets weird. I took my same piece of wire I have been testing with and touiched the negative terminal and the body ground (right behind the battery), and after a few sparks, I saw that I had just under 13 volts at the headlight (and the wire got hot after a few seconds). Removing the wire, the voltage dropped right back down. I touched the wire from the negative terminal to the engine ground and did not get sparks or heat, so I am assuming that there is no ground issue there that would make the electircity want to flow down my wire, leaving the body ground itself as my issue. So I removed the battery box and recleaned/sanded the terminals and sanded the area that the connector touches to shiny bare metal (actually shiny, not the grey undercoat that is present under the paint). But the problem is not fixed. It is almost like the wire itself is bad. It has ~1 ohm of resistance and looked to be in good shape, but I can't think of what else it could be.

Any ideas?