Proper way to bypass heater?

a temp sender is usually a one wire deal that grounds to the engine block, and provides a variable resistance for the gauge to interpret;
providing that you have not insulated it with the wrong sealer.

A temp Switch is usually a 2-wire snap switch, on/off deal; power in and then it is relayed to whatever device you want to switch.
The actual thermo part inside can be the same for both.

You can use a 1-wire deal with the correct wiring, but will probably need a relay to get the power handling capacity that you might need, and just use the sender as the trigger. And, the sender is a variable resistance, that needs a controller so you can interpret that resistance into on/off switch, at any point on the resistance curve. I would not try to run much power thru a sender.

In both cases, the thermo-element has to be in direct contact with the coolant, and not stuck in a stagnant pocket. If the temp gets away on you, and the water boils, that vapor will try to accumulate in the highest spot of the system, usually the upper radiator hose....... or the top of the rad. As the coolant boils off, the liquid level drops, sometimes leaving your switch ignorant of the situation, which then allows your engine temp to run away..........
So if you have to run an electric system, it's best to make it a closed and fully recirculating system, that cannot accumulate vapor where ever your sensor is located.
The Dakota Digital, in theory, allows you to tap into the coolant temp sender. This feeds into the control which is connected to a relay for the fan. If it works I should be able to set on/off fan with accurate temps. It’s also Bluetooth programmable allowing changes remotely.