[Barnsnake]

You really do need a bypass hose if you have a thermostat.

Without the bypass the coolant in the engine does not move unless the thermostat is open. The coolant around the cylinder heads and the upper parts of the cylinders can reach or exceed the boiling point while the coolant exposed to the thermostat is still relatively cool. When the coolant at the thermostat finally heats by convection and the thermostat opens, a gusher of REALLY HOT coolant heads to the radiator (and past the gauge sender). That coolant is replaced with the relatively cold coolant that has just been sitting in the radiator and the thermostat closes. The cycle then repeats. This will result in your indicated temperatures going up and down like a yo-yo. It probably also puts some considerable thermal stresses on the hotter parts of the engine.

If you put enough holes in the thermostat to eliminate this phenomenon, it will probably be unable to control the engine temperature when the ambient air is cold.

The reason for the drilled hole in the thermostat is to allow air to escape from the engine when filling the cooling system. A single 1/8" hole will pass plenty of air and do the job nicely if it is at the top.

In short, if you have a functioning thermostat you need the bypass hose.