won't make it seem hotter, the water temp is what's being measured, and that'll be much the same anywhere in the top of the engine .... one thing you haven't mentioned is whether you've used a good thermometer [as in a hand held laser infrared one] to check the real temp, including at top and bottom of the rad and on the thermostat housing
also as stated above, 200 is not hot for a modern small block, what's much more worrisome is running cold for long periods, which is what the 170 is, check the recommended stat rating for the engine and year, I wouldn't be surprised if it was a 195 .... the way a stat works is to set the minimum temp the engine will run at, the stat should open within +/- a couple degrees of the rating, so if your 180 closed at about 178-180, it wouldn't be possible for a continuous 170 reading to be correct
from your descriptions I think your cooling system is overkill for the highway and not moving enough air thru the rad at stop and go .... and you need a higher stat, or at least a different [not defective] one
Bill
