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You're absolutely correct. I have the converted 5411 as well. The correct setup is as you show it. The line from the top of the thermostat housing goes to one end of the exchanger, and the line from the bottom of the t-stat goes to the other end via the mixing tee. The third line from the tee goes back to the pump. Do you still have the 140 deg thermostat installed? With fresh water cooling a 160 or 180 deg t-stat should be used to allow the engine to come up to proper operating temp.