This device is used to route coolant from one of 2 sources to the bottom of the thermostat housing. The end plug is only rotated, never removed for draining. (actual draining is done at the drain plug under water pump).

In normal operation the valve should be in the OFF position, ( <=OFF pointing to housing mark ~ 2 o'clock position), the lettering will be upside down. This allows some coolant to bypass radiator through the radiator bypass line and flow under thermostat and to the suction of the water pump.

When draining and refilling cooling system, the valve should be in the ON position, (<= ON pointing to ~ 2 o'clock). To rotate valve, first loosen off the lock screw a few turns, then rotate the valve to the desired position...then tighten lock screw. The valve originally has a spring loaded detent ball that should seat when moved to either position. In this position the bypass line is blocked and the small hose from bottom radiator tank is open to flow under thermostat and allow coolant draining with thermostat closed.

In order for the thermostat to operate properly the drain must be closed (OFF) under normal operation.

The water pump is driven by gear from the engine. Since the pump shaft has contact with coolant on pump end and engine oil on the drive end, it is equipped with 2 seals to prevent cross contamination of the fluids. In between these seals is a weep hole that drains to atmosphere to monitor seal operation. As the seals wear, leakage will be evident at the weephole. The weephole should never be plugged to prevent draining occuring. The overhaul of the water pump is covered in this tech library article.
http://www.venturers.org/Tech_Library/index.php?action=article&cat_id=001008&id=318

The bottom of the water pump housing is fitted with a drain plug to facilitate coolant draining for maintenance.

Both units are accessed by removing the riders right triangular side grill from the radiator.

The thermoswitch senses coolant temp and opens and closes electrically to activate the radiator fan. Early 1st gens (83-85) had a single wire thermoswitch that grounded the fan relay circuit to start fan.The early thermoswitch has a spade wire connector. The 86-93 models use a 2 wire thermo switch that is supplied with power on one wire and when closed sends power to fan on the other wire. The thermoswitch should start fan at ~ 221 F ( 105 C) and stop fan at ~ 208 F (98 C).

Pictured here is the 86-93 thermoswitch.

The thermo unit senses coolant temp and has one wire with a round bullet connector from the temp gauge. The wire grounds through the thermo unit.The resistance of the thermo unit is high at low temp, and drops as the temp goes up, causing the temp gauge to respond accordingly. The round connector tends to loosen if bumped, and can cause low or no gauge reading. Gently squeezing the connector with pliers and reattaching to terminal will restore the readout. If the wire is grounded without resistance it will cause the temp gauge to spike to top and can cause gauge burnout.

It should be noted the 83 models temp gauge calibration tended to run with a higher reading than later models. On all models, the temp should still remain in the upper green section and never boil over if the system is functioning properly.

The bypass line flows from top of radiator through the drain valve (when in the OFF position) then under the thermostat and into water pump suction elbow. This ensures coolant is circulated through engine while the thermostat is closed, and the thermostat is sensing it. Flow in this line can be verified by feeling the line as the bike warms up.....the line will warm up first, while the bottom of the radiator will still be cool. Flowrate in this line will be greatest when thermostat is closed, and lowest when thermostat is open.

The thermostat design is a bit unique on the 1st Gen. It is located between the radiator and the water pump suction elbow. The housing contains 3 connections, one from the radiator outlet to top side of thermostat, one from the drain valve/radiator bypass line under the thermostat, and an outlet line (90 degree elbow) going to the water pump suction. With engine cold, thermostat will be closed, allowing only bypass fluid to enter water pump, as the bypass fluid warms, the thermostat begins opening to blend in cooler radiator outlet fluid so the correct temp going into water pump suction is maintained. (Most other designs regulate temperature leaving engine). The thermostat is designed to start opening at 176-183 F (80-84 C) and be fully open at 203 F (95 C).