What counts is drawing the heat away from your engine. In terms of upgrades, get the coolant to carry the heat from the engine to your radiator and back again with a working water pump. Once it is in the radiator, it has to be distributed somewhat evenly throughout, so make sure there aren't any clogs. To remove the heat from the coolant, get a strong airflow going through the radiator with an electric fan. Get the heat to move out via coolant and airflow.

As for the thermostat thing, the thermostat opens around 195° F and maintains a temperature nominal for the engine, which is somewhere near 210°F. If it drops below some temperature, the thermostat will close again to keep heat in the engine core (if you're driving in a snwostorm, for example). The thermostat isn't set to open at 210°F because the engine would then probably reach around 230° before coolant starts flowing. You can get the engine up to maybe 200° before you feel the coolant gush through the upper radiator hose. Now, this may not be the same for everyone because of the various climates, but that's the way it's supposed to work. The bombproof inline 6 can probably run pretty comfortably anywhere from 190 to 225°. So no worries.

Get your engine too cold and your thermostat will close and your ECU will increase the fuel/air ratio. Too cold an engine and you'll waste a little fuel. 180° thermostats are not the solution, they'll just make your engine temps go further up and down as it opens and closes because the ECU is still trying to hold 210°. Your engine is dropping to 160-170 because when the thermostat closes the engine is in the process of cooling. It then has to recover from being so cold, so it increases the fuel ratio to warm it back up. By the time your thermostat opens again the engine is in the process of warming up, so it'll get hot until the coolant brings it back down. Fluctuating the temperatures of metal frequently isn't good for it. Your best bet is increase airflow and surface area on your radiator. A higher flow water pump just pushes water through faster, it doesn't necessarily have time to sit in the radiator and cool before it gets pushed back into the engine. Bigger rad, bigger fan. If you double the rows in your radiator, double the airflow.

 

Both my Jeeps ('88 XJ and '99 WJ) have 195* T-stats and both are happy running at somewhere around 210*. My friends 4.0s all run about the same temps. Don't worry about it and run your Jeep, it wont break at 210* or 215*. Just have some fun with it!

 

A friend of mine broods chickens. He puts three professional-grade thermometers in the incubator because a difference of 1 degree can mean you get all hens or all roosters. All three thermometers read DIFFERENT temps by 1 and one-half dgrees so he averages. I don't care what Al Gore says, the only thing about temperature you can be sure of is that no two instruments will read the same. Sometimes, they won't read the same two days in a row.

I also know the cheapo temp guage in my sixteen year old XJ was cheap the day it was installed and sixteen years old now. If my engine is actually 210 degrees, I'd be stunned. I give that thing a ten percent is close enough rating.

Finally, the tstat determines when coolant is allowed to circulate into the radiator. That is all it does. And they wear out and change over time, too.