That kinda depends on a number of factors. If the engine has not been running long, but has reached "normal" running temperatures, it is quite possible for the water in the radiator to be significantly cooler than the water in the engine's water jacket (especially with the winter temps we are getting.) Then, when the thermostat opens to allow circulation, the cooler water will hit the temp sensor and the needle will drop a little, soon to recover to "normal" depending on how sensitive the sensor is and how frequently the reading is checked. Many modern gauges do not give a constant reading of the current temperature, the electronics only take a sample reading every so often. (If you doubt this as an example, try leaving your ignition switched on when you fill up with diesel and watch the fuel gauge on your dash.)
Also, I'm curious, when you say it smells hot, is this from inside the car as you are driving along, or is it when you stop and sniff the bonnet (or under it)
If it's from inside the car, have you considered maybe something blocking the air intake vent for your heater fan?
Or maybe a badly fitted (high) exhaust heating up the floor pan?
If it's from under the bonnet, most engines and peripherals which are running at "normal" temperatures will make some mild ticking noises as they cool down for the first few seconds once the engine is switched off, but, in the case of an engine running significantly hotter than usual, these noises are much more intense and obviously so, it's difficult to describe as one man's description of these noises could be far from another's man's impression of them. Also, there is usually a sort of haziness to the air around the engine if it's seriously overheating so I suspect everything is ok in your case, believe me, you'd know if it was very seriously overheating, you'd never get near enough to open the pressure cap on the radiator without some degree of trepidation and a lot of thick rags, and if you did get it open, you'd probably never do it a second time for the rest of your life.