Sounds like a simple air pocket in the engine, fill with water only and install the thermostat once the water level is up to it. The lower hose should be fine, it hasn't run long enough to heat the hose or really start to draw in from the radiator. Is the hose stiff or really soft? Soft hose might need a spring inside if it becomes a issue.
For now, just get the air out and keep the radiator cool till you can be sure the timing and carb are set right. Once you are happy with the tune up, then look at the coolant system for any problems.
