I wouldn't remove the bypass, it is there to keep steam pockets from building up in the head and it keeps the water temperature more even to keep the cylinder wear even between front and back.
I don't know a whole lot about 292's, but I do know they are supposed to have a differant water pump than a 230/250, and the bypass thermostat plugs the bypass hole when it opens so all the water goes through the radiator.
