Water in the oil

[THEFERMANATOR]

NO on the rgulating valve. Figure out why your set-up is bypassing first. Does your T-stat have a plastic sleeve that goes in and holds it upwards? The water should be able to circulate through the block all the time, but when the T-stat opens it allows it to flow out and suck in more from the raw water pump. Do you currently have a universal pump? I know some engine driven water pumps are directional, and some are able to turn either way. If your's is a serpentine only style, and you run it with a V-belt it will run to cold. The cooling sytem on your engine is so simple, it can be confusing. You could also have a blockage in your T-stat housing that is allowing the raw water pump to force cold water in. Take a picture of how your installing the housing, particularly the T-stat portion.