what is this grey connection?

It's located near the actuator and to the right of the starter motor? It's grey and is loose. Is being loose a problem and can this be replaced?

Is it on the coolant tree?

The water temp gauge connector is grey, but the connector in your pic looks a bit different.
Does your water temp gauge work?
 
I found this pic.
The oil pressure sender connector in the pic is also different to the one in your pic.
This diagram is for a turbo but the NA loom is much the same.
 

The cold start timer connector should be black, but is yours just dirty.
It does look the correct shape though.
I also made an edit to my first post.

petmr2
Yeah my pic does look different and I'm pretty sure I don't have the oil pressure sensor connection there but I'll need to double check...

I can see the black connector for the oil press sender connector just above the green plug in your pic.
Some oil pressure sender connectors are a different shape.

You should be able to locate the oil pressure sender unit that will be screwed into the top of the head.
It will only have one lug in the center.
Your oil warning light won't work properly without it connected.