I looked at the thermostat housing last night briefly and think you hit the nail on the head. It does have a shoulder for that seal although its heavily crusted up. And the bypass couldn't have been working with that wrong thermostat that was in it. That was probably my main problem.
I just bought the 706 last fall and really only used it once in December to disc about 10 acres. It didnt give me any trouble then and the temp seemed normal the whole time but the seller mentioned he had trouble with the thermostat at times so I had bought a new one shortly after acquiring the tractor but never got around to changing it.
When I moved it out of the polebarn a couple weeks ago It suddenly spewed a spurt of antifreeze out the overflow after running for just a few minutes. Temp still seemed OK after that but reminded me to look into it.
I will see if I can get the housing cleaned up tonight and then post of a picture of how it goes back together.
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