Sounds like you got a "steal" Sunset!
Our 1976 Albin Deluxe with MD17C came to us with an "overheating" issue, too, and we had a very interesting outcome at Larsen Marine in Waukegan, IL last Summer. Their Mechanic ran it awhile and said the gauge reads in the red, alright, but the motor doesn't behave like a "hot "engine; and it starts instantly when indicating "hot".
So he tested the thermostat in a hot saucepan and found it OK, too, though so "gunked up with old age" that he replaced it anyway. What he found was that the temp sending unit was reading in the red when the sauce pan wasn't that hot. A new temp sending unit has us all fixed up and running at full throttle in the "green".
Our boat's prior owner told me he thought Cyl #1 was running too hot.