"Percival P. Cassidy" top-poasted:
We had a '73 Newport that had a vacuum-operated valve in the line going to the heater core. The valve was operated by the dashboard cabin heat-control levers. The idea (I think) was that in the summer you might not want hot water circulating in the heater core.
Maybe the 300m has a similar valve - and it's not working properly (and that's why you're not getting cabin heat).
Even if that was the case, it wouldn't be the cause of the temp guage going into the red - unless there's a problem with the sensor?. If the coolant sensor is sitting in an air pocket (ie - if it's not immersed or surrounded by coolant for some reason) then it's possible that it could reach a high temp that's not representative of the real engine coolant temperature.
What I'd do if I were you is run the engine without a thermostat. I used to do that with my '65 Polara (with slant-6). Running without a thermostat and the temp still going into the red would tell you that the problem is not the thermostat.
You could also try an alternate way of measuring the engine temperature (external hand-held temp guage of some sort) to confirm over-temp condition before taking the pump out.