LM35 and Character LCD
Firstly you do not keep your code consistent between you temperature test and your LCD test code. The problem lies in your use of the internal analog reference, that reference is 1.1V and that is giving you 130°C.

Temp = 260*0.5= 130

The 260 is the ADC reading worked back from the 130°C you gave

To use Internal reference-

Internal ref = 1.1÷1024=0.001074219
That multiplied by one hundred to account for the mV reading of the lm35 gives 0.107 that will give you the correct temp when using the internal reference

Analog reference from the arduino site.

If you want to use the analog reading *0.5 comment out the analogReference()