Thermostat probably won't be the problem here, if it's been removed it will run cooler not hotter. I would say it's the head gasket that need's looking at.
Take the head off and flat off the gasket face using a bit of plate glass with some 600 grit wet & dry tapped to it.
If you take the barrel off you can do the top of that too.
A new gasket should fix it.
Dobbs

Well a head gasket later it was fixed. That was easy so thanks for all your advice. She Runs sweet now and i just repassed my bike test today so its on eBay. Was so worried I wouldnt be able to use it for my test. Time to get back on the 400 at last :D