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Terry,
First, welcome to the Forum. Hopefully you'll get some good advise here (if not from me, then from someone else - grin).
Overheating is not uncommon, particularly with raw water cooled engines. The blocks (and some other cast parts - not the side plate cover) are a high nickel cast iron and quite corrosion resistant. But even without corrosion, the raw water and heat will precipitate salt in the engine, tending to block things. A common place for blockage are the small passages between the block and the head by the valves.
Personally, I like running without a thermostat. Running the engine cool is not a cure-all, but I prefer the consequences to those from overheating. I'd also install a valve in the bypass line so you can control (or shut off) the bypass flow.
In your case, I suspect what happened is that removal of the thermostat and the new impeller caused increased flow - picking up all sorts of loose gunk inside the block and flushing it out. However, it just moved it somewhere else where it clogged things up. Could be anywhere downstream, but my first guess for a clog would be the outlet elbow on the manifold. Keep in mind, you should be able to blow through any component of the system with little resistance (including the block). The pieces are all connected by hoses. Disconnect them and try blowing through them individually - you'll quickly find the culprit (and perhaps some shaky hose clamps).
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