If I understand your parts list correctly, you'r running a 351-W thermostat with some sort of restrictor in the bypass hole? If this is true, it means that the bypass hole is always open to some extent, and "bypass" means that the system is routing water around the radiator, bypassing any cooling. By cutting the hole down from 5/8" to 3/8, all you've done is lessen the volume of water that never gets to the radiator. I suggest you either use a proper 351-C thermostat, or plug the bypass totally and see if one or the other helps your open-track problem. As it is now, you're handicapping the cooling system, and we don't have much margin for such.
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