Over cooling!

Losing interior heat AND a dropping temp guage, CAN be a sign of low coolant level as well. I know you said it blows out any fluid that you add, but if you have air trapped in the system, it COULD do that. SOMETIMES a heater core is hard to bleed.

I agree with a higher rated stat. I have run a 205 for many years in my 360FormulaS,in summer, and my other cars never run less than a 195 up here in Southern Manitoba. And I run a 7psi cap, whenever I can. The hoses last forever, and it's easy on the old rads.In your hotter summer climate, that might not be enough, but our heat waves usually only last a week in July, and even then, only during the part of the day when the sun is directly overhead;while I am at work,not on the road.heehee
Yeah so, also up here, running cardboard on these old engines is very common. The stat only sets the minimum operating temperature.My 1980Volare slanty absolutely has to have cardboard from December through Febuary, the rad being covered about 90%. For November and March I might run 50 or 60%. This is more to prevent ram-air from cooling the block, as it comes through the rad, cuz the rad itself is often cool, as the heater core is extracting a lot of heat. Those slantys have a whole lot of surface area to radiate heat, so the rad in January, barely gets warm. even though the airtemp coming out the heater might be 140 to 150*F. I have often taken off the 4-blade fan as well, to reduce air-cooling.