Do the newer magnum style thermostats flow enough

Could easily be that the gauge is off that much. But indeed that would not explain why the temp would drop to 175 after 'always' running at 195 regardless of t'stat temp....and contradicts the OP's original symptom description where supposedly a 160 t'stat still ran the engine at 195.

OP, did you perchance change the t'stat brand? What brand are you using? Some are not so hot...er, good....

And be aware of the fact of accelerated internal engine wear for lower engine temps.