The normal way it works is the coolant from the radiator comes up from the bottom outlet to the thermostat housing and is stopped by the thermostat, where a little bit is let through by the jiggle valve until it gets warm. The pump draws it's coolant from the thermostat housing, behind the thermostat, it gets pumped in to the block and in to the head as you say and then it can go 2 ways, either to the radiator or back via that bypass pipe to the thermostat housing.
When the thermostat is closed, pressure builds up in the bypass pipe, as it can't go the other way in to the rad, as the outlet of the rad is being blocked by the thermostat, and there is a negative pressure in the thermostat housing, as the pump is drawing coolant out of it, so the little spring on the back of the thermostat allows coolant from the bypass back in to the thermostat housing where it is recirculated.
When the thermostat opens up, the coolant from the radiator is allowed to enter the housing, which means the coolant from the head now how somewhere else to go rather than the bypass pipe (it goes to the radiator instead) and thus the little spring on the back of the thermostat stops coolant from going the wrong way up the bypass pipe, which would be bad as it would bypass the actual engine.
See this photo:
The other lines coming from the housing are the No. 5 bypass pipe, which goes to the oil cooler and then returns to the back of the block, and the other large hardline that runs off to the heater, throttle body and turbo.
Now, because I'm running an electric water pump and no thermostat, it can't be allowed to bypass so I've cut and sealed off the bypass pipe. I've also deleted the oil cooler so I have capped off the no. 5 outlet, as well as where it would return in to, at the back of the block.
That leaves the other hardline. I no longer run coolant through the throttle body as that is for cold conditions and I no longer run a heater, but I still need the turbo to get coolant. So my hardlines now look like this:
(They just need braised at the crimped ends and painted).
The one solitary output port goes to the turbo and then the return for the turbo will get plumbed back in to my new neck at an appropriate angle for flow.
Make sense?