OK, final comments on this issue.....
I was prepared this weekend to modify the thermostat to close off some of the bypass holes on the top when I discovered something very interesting/disturbing. I found that someone in the past had put a washer in the very bottom of the thermostat housing - which is the exit point of the thermostat housing to the recirculation line. Why they did that I'll never know. But it turns out that the thickness of the washer and the diameter of the thru hole effectively meant that the bottom of the thermostat was sealed against the washer in its closed position - there was no way that cooling water was going to the recycle line - even when the thermostat tried to open - yikes!
I removed the washer and behold - back in business with noted temperature rise during the first 20 minutes of operation on the temperature gauge. That included less noted water output from the exhaust on start up - presumably since more water was allowed to exit the recirculating line instead of being forced out the exhaust. I never got up to 140 degrees where the thermostat opens but that's OK with me. I figure if I'm operating from 120 - 140 degrees normally, I'm good.
Anyway, I'm closing the book on this issue for now but will continue to monitor. Thanks to all who offered their comments and thoughts.