I have been struggling since August with very similar problems with a '98 Legacy Outback, 2.5L engine. The problem appeared after I replaced a broken heater hose. To make a very long story short, the cooling system now seems incapable of handling the transition from high load, high coolant flow conditions (e.g. highway driving) to light load, low flow (e.g. suddenly slowing down in traffic). The temperature gauge will spike from the normal 9 o'clock position to offscale hot in about 30 seconds. If you see this happening and immediately place the car in neutral and rev the engine to about
4,000RPM, the system will usually recover, with the temperature gauge dropping back to below 9 o'clock within 30 seconds. If you don't catch it fast enough, the coolant will boil over. The car has no problem cooling during extended driving in stop and go traffic on hot summer days, only the transitions bother it. It appears the thermostat can't open fast enough to deal with the changing load- but no thermostat is going to respond on a timescale of seconds. The cooling system was pressure tested by a local garage, who found no problem. Drilling a few 1/8" bypass holes in the thermostat flange to allow some coolant flow even when the thermostat is closed seems to have provided a solution to the problem, but with temperatures often going to -20C here the engine doesn't warm up properly. (It's worth noting that in a post a few years back the owner of a used Legacy of this vintage discovered the thermostat had been removed, and found overheating problems when a new thermostat was installed). I have filled the cooling system as slowly and carefully as I can, including extended running at idle with the radiator cap off to "burp" the system. The burping seems to go on for a long, long time, suggesting it is very difficult to get air out of the system. If anyone has a solution to this strange problem, I'd really appreciate hearing it. In the meantime I'm living with the bypassed thermostat.Garry