Okay so I originally put my new thermostat with the spring up; unfortunately, the engine was upside down on an engine stand at the time. Found out right away and reversed it.
Drove fine for a while and now the needle is shooting all the way to the top of the gauge AND I lose all heat out of the heater and I'm losing coolant but can see where. Did a pressure test on the cooling system and it held 16 lbs for hours on end.
Called Brokenindark and he suggested to pressurize it to 18-20 psi. Did that and found a pinhole leak in one of the heater hoses up by the firewall. Removed the offending inch of hose and now it holds 18 psi no problem.
New radiator cap. Pulled the thermostat out and I did have it in according to the Subaru Manual, with the spring on the engine side. Took it in the house and brought it to a boil with a thermometer in the pan. It's a 170 and by 175 degrees it is starting to open and by 200 is fully open, about a 1/4" gap all around.
Thermostat has only one writing on one of its support posts and it says "MOTORAD". If I take this to mean Motor side and Radiator side, it is backwards; that is, the coil spring is on the radiator side.
What's my next step guys? Leakdown test? Hydocarbon test?