Thanks pfarber, You are right about getting the proper 261 thermostat parts. People keep listing the 235 parts for the 261 on Ebay and they will fit but, they aren't really for the 261. I have a lower thermostat housing but so far I haven't been able to find the upper part. After looking at the 261 lower half I can't see how it can be a true bypass system like the new engines have. It looks just like the 235 unit except larger.
Thanks again for the info.