The problem: The car runs on the hot side, near 100 C. The operating temps actually vacillate between ~92 C and 100 C, during normal driving (no heavy loads, AC off, ambient temps around 75 F). I know that this is within acceptable range and is considered normal by some, but in comparison to my 85 300TD it is 10-15 C hotter. I bought the car a couple months ago, but haven't driven it more than 500 mi yet (I've been working on it). It was filled with green coolant and had this problem when I bought it.

Previous work:
1) I degreased and citric acid flushed the system. It is currently filled with 45% Zerex G-05:distilled water. There was ALOT of scale build up prior to the acid flush. All flushes were done with the thermostat out, heating the car up to operating temp for 15-45 min while running the defroster, pulling the radiator plug - block plug - temp sender and upper radiator hose and flushing with a garden hose.
2) The thermostat was replaced with a new 80 C Behr unit, installed correctly. I have tested it (in the thermostat housing, out of the car) with boiling water and it extends fully to block off the radiator bypass, but there is no way to tell if it opens "fully".
3) I have tested the temp sender/dash gauge by grounding the temp sensor and immersing it in 90 C water next to a laboratory thermometer. It reads true within a couple degrees.
4) I removed the radiator, filled it with boiling citric acid and let it sit over night. I power washed it at the local car wash from both sides to clean any dirt and debris. I am fairly confident that it should have good coolant and airflow. There are very few bent fins.
5) I have swapped the coolant tank cap on both cars, the system does pressurize when hot and hold pressure overnight.

The questions:
1) How is the fan clutch supposed to work? When the car is cold and I shut off the engine the fan stops immediately. When it is hot the fans spins a few extra revolutions. This is true of both cars. In direct comparisons the fan clutch on my 85 300TD (which runs cooler) has more resistance when spun by hand. Not a huge difference, but noticeable.
2) I have seen posts stating that the water pump impeller blades had worn down. How is this possible?
3) Other than swapping parts between the two cars, what other diagnostics can I do?

EDITED on 07/24/07: For the record it was the thermostat, but please read all the great suggestions.