Thank You All!
I did change the thermostat and it did the trick. Temp is in the normal range now even in traffic.
The knocking and pinging came from a small crack in the distributor cap. That is now fixed and I am a very happy camper.
I am fully enjoying my new purchase and as a first time buyer, I have never enjoyed driving as much as I am now.
1987 260E Charcoal Grey 157,000 Miles
1987 260E Forest Green 120,000 Miles