The bypass allows coolant to circulate within the block & heads while the thermostat is closed.
Makes for a faster warmup.

Nothing is harmed on a performance engine by leaving the bypass operational.


On Ford products - the 400-M for sure and probably others - the thermostat is constructed to block off the bypass when the engine is hot and open the bypass when the engine is cold.

This can lead you to a trap of sorts.
Not sure if it's still true, but the only thermostat available for the 400-M (in a 77 Ford 3/4 ton 4x4 at the time - early 80's) was rated 197 degrees.

If you wanted a lower temp rated thermostat, Chevy's would fit, but didn't have the bypass blocking plug like the built for Ford's thermostat did.

What happens when a Chevy 180 thermostat is installed is that flow is split with part of it going through the radiator and part back through the bypass since it was always open.
The engine was always on the edge as far as running hot went.

Took a while - including two radiator shops - to figure it out.
Not to mention a new "Desert" radiator, water pump etc.

I finally figured it out on my own and the fix was to tap the bypass hole for a flush allen plug - the hole is the right size for 1/4-NPT if I remember right.

After that, the engine cooled well and I liked having it run at 180 with the Chevy thermostat instead of almost 200 when the Ford thermostat was installed.