There is not suppose to be a paper gasket on it at all..the rubber o ring that fits on the t stat is what seals the housing together..Is the engine getting hot at all?? If you drove around for 20 minutes and brought home ,opened the hood and put your hand on the top large radiator hose,would it be hot?? If the hose is just warm,were you are not un confortable holding it.,.then there is a need for a new t stat..that hose should be HOT..that hose should be about 180 degrees hot and that is hot enough to burn you after a few seconds. but if it is just warm,then your gauge doesnt really start reading till it gets about 120 and that is what you are saying about the problem with your gauge..

I just replaced a tstat on my 83 300d and it was not stuck open,but it always ran cold..it just simple opened too soon..new t stat and everything changed..it now runs about 185..

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1978 300SD 303400 miles
1983 300D 341270 miles
1980 300SD 320456 miles