I have a t-stat housing on a BBC that has 2 outlets and one goes out the transom and does the other go to a t valve and to the headers?
Yes.
the line that goes out the transom do you need a gate valve or ball valve to restrict water flow slightly so the t valve will work?
No.
gate valve or ball valve?
Gate...At least a four turn. see below.
and I have also heard that this is bad and you should make both lines go out the transome and a port on the intake to gate valve and then t valve to headers. The person that told me this said I will build too much waster pressure and get water in oil if I dont do it this way.....so now this has got me worried that I need to do it like that...what does the majority of everyone run?
BS...
Water goes like this.......from the pump to a multi turn gate valve with an adjustable packing nut. then to a diverting tee, from the tee to the inlet of the block via the water pump block off plates (if log exhaust, to the lower holes of the exhaust then out the top to the front of the block)...Out of the thermostat, one to a small dump line (like a 3/8" hole or no larger than 1/2") the other t-stat hose goes to a control tee (Bassett or Rewarder) and then to each header...
When adjusting, simply adjust the gate valve so the engine runs with a pretty good flow out the dump at idle (typically shoots out about three feet) and when the throttle is hit, the exhaust should steam at about 1500 RPM, your done...
Hope this clears some confusion....
I am sooo confused now.... 
LMAO
I have seen this very method support a naturally aspirated 800 HP big Chevy all day long....
GT
