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I totally misled the OP on Facebook, that thermostat is correct and doing what it should. When cold, the T-stat is 'closed' (from the perspective of the radiator) and that rear bypass opening is recirculating coolant (coming back from the heads via the water crossover) downwards to the pump and back out to the block on both sides. When the T-stat 'opens', the bypass is blocked off and the coolant from the radiator circuit can now flow back to the water pump and block.
The problem is that the typical mental paradigm thinks of "open and closed" as a one way street- i.e. the thermostat "is" or "is not" open at a single location.
In reality the thermostat is a control valve with a progressive orifice- it starts to open at 83C and it is fully open at about 90C. Between those temperatures some flow is circulating internally and some is flowing via the radiator circuit just as Rob says and the proportions vary as temperature increases. At 90C the back seat of the thermostat [seen in the photo] now sits on the rear seal face and closes off the internal re-circulation flow path completely and the front flow path of the thermostat by then is fully open with the radiator circuit doing what it is designed to do.
At this point coolant leaving the water bridge is typically operating at circa 98C and the water returning to the engine will typically do so at about 90C. For the later model cars with electric fans the control system looks at the coolant temperature leaving the radiator and the fans are maxxed out speed wise if and when the coolant returning to the engine is at 95C. The driver does not see this temperature as the dash panel gauge reports the temperature of the coolant as it leaves the engine or recirculates internally. Earlier models with a viscous coupled mechanically operated fan do a similar thing with the coupling responding to air temperature to some extent.