Sounds like you installed a standard thermostat for a 235 engine and upside-down.
The original larger 261 bypass housing requires a special by-pass thermostat, if you want to connect it as stock.
With a regular thermostat (and stock hose connections), if it even fits and is installed with the right direction of flow, you would still have a large portion of hot coolant bypass the radiator.
With a regular thermostat, you should remove the stock bypass hose that connects directly to the waterpump and plug both ends.
