OK, I had had some time to go through this thoroughly...
I have come up with three critical mistakes. Please don't take any offense, just trying to help.

The thermostat housing is plumbed completely incorrectly. The upper and lower outlets are not correct. There should be a bypass tee at the inlet on the incoming water. Do you have the spring and the plunger installed on top of the stat?
With two dump lines, you cannot build enough pressure to eliminate steam pockets.
I do not like the way the header valve is plumbed, I believe it has the potential to overfeed.
The thermostat tower should have water from the jet pump going to the top holes of the stat housing. The two lower holes should go one overboard and one to the header valve.
When the engine is cold (below thermostat temperature range) the water flows from the jet pump, to the front of the engine and the top two holes of the stat housing, the water bypasses from the top of the stat to the lower holes allowing water to flow overboard and keep the headers in cooling water.
When the engine warms up (water temperature above the thermostat range) the bypass plunger closes and water flows from the thermostat and out the lower holes on the stat housing. the thermostat now has control of the leaving water temperature and will open and close based on engine load and cooling needs. The bypass plunger will float based on the amount of water flow needed. Always keeping the flow to the dump line and header valve consistent.
The reason you want to keep pressure on the water system is two fold, one to eliminate air from the system, air locking is a huge concern on an open cooling system, the second is to raise the boiling point of the cooling water and prevent steam pockets from forming.
What you have going on there is literally no flow at all until everything is so hot that you're introducing cold ass water right to the front of the block and with such low flow extremely hot water at the front cylinder combustion chambers. This is the number one reason I dislike the stat kits so much. Too great of a delta between cylinders 1 and 2 and the heads at cylinders 1 and 2. I know you guys all think I ma just an anal POS about that but think about it for a moment. The water is entering the engine at say 60°F and it leaves at 160°F? there is literally a 100°F differential between the front cylinder walls and the heads on the same cylinders.... That IMHO is ginormous.
Reroute a couple lines, eliminate one dump line, and I think you will be OK. Also, make sure the plunger and the spring are in there.... They simply have to be.
Unfortunately, the heads need to come off... I hate doing chit twice...

I think this is totally correctable with little drama, unfortunately, the damage is done.
Let me know if I can be of any help at all... This is not my first rodeo...

GT