Hopefully you don't have a blown head gasket.

The previous owner may have disconnected the heater core due to the water fall sound coming from the heater core.

The water fall sound is air in the cooling system and in the heater core..

I would hook up the heater core and a new thermostat.
may as well put the soft spring thermostat in which will lower the temps a bit.

I use an unorthodox way to bleed.

I raise the coolant bottle.
And, wedge a screw driver under it to hold it up.

I fill it up to the fill or full line.

I run the coolant expansion tank or bottle with the CAP OFF and the engine at 1,800 RPM.

If the coolant bottle pushes out FLUID - STOP. You probably have a blown head gasket.

If the fluid then does not blow out the top, but, simply lowers a bit, then this is your AIR getting purged out.

Just fill it to the fill line with more antifreeze.
Put the cap back on.
Put the bottle down where it goes and clip it in.

Done.
I never ever touch that bleed screw.

As long as the coolant bottle is the HIGHEST point in the cooling system -
for awhile - then it will bleed with the engine running - just like
the Discovery I (which it is born from).

 

ummm... if the PO bypassed the heater core, did he just plug off each end, or did he install a loop, where water intended to flow thru the core still had an open path? See attached flow chart.

When main stat is closed, no water flows bottom to side arm that runs to water pump. Water from rad comes in small metering holes on the top of the stat. At idle that water warms up the main stat until it opens. Above idle, the water pump makes enough PSI that if the main stat is closed, the bypass disk (with holes in it) is forced down. This relieves some pressure on the heater core.

But if stat is plugged up with gunk, holes don't work. And if heater core plugged off, instead of a small loop of hose used to bridge around it, there would be times when no water is flowing in the stat, and engine will heat rapidly. The system expects to be able to push water thru the heater core all the time, there is not shut off valve in D2s and later D1s.

Bypass plumbing shown on D1, which is "Slang" for "never ending story."

 

Thanks for all the advice guys,
so I rerouted the lines back through the heater core and elevated the coolant bottle. I ran the engine at 1800 rpm for about5-7 minutes then it did start to back up out the coolant bottle. the temp did stay steady at mid level on the gauge on the dash. no overheating. Does pressure build as the engine runs and eventually the bottle overflows or is this a sign of a bad head gasket as jfall said? I ran it for a while before it finally happened I thought I was out of the woods then bam steam!