During initial climb at 700 feet above ground level, the tow pilot experienced a total loss of engine power while towing a glider. The pilot released the glider which landed uneventfully. The tow pilot reported that he was unable to return to the departure airstrip, so he made a forced landing on a nearby dirt road. During rollout, the airplane collided with bushes and was substantially damaged. The pilot further indicated his airplane's engine quit because the fuel tank was empty. The pilot reported that the fuel tank gauge had malfunctioned and had a tendency to hang up.