I hate these stupid Chinese made cast iron thermostat housings! I would find a good used off ebay or from someone on this forum before using another one of those P.O.S.
One thing I found... I've got a 5.0L '88 XR7 and wanted to replace the thermostat housing... I got two from O'Reillys that were completely the wrong part... it didn't match at all. Doublechecked the part, it was the correct number but the wrong part. Ended up getting the right one at Autozone finally.
As always, be sure you check the part for correct fit before you get in a situation where it's difficult to swap it out.
I've been having some problems with my 1988 XR7, low beams intermittent, highs were working mostly steadily. Mine was definitely the multifunction switch on the column. I could smell it being hot when driving at night for any distance. I took it apart last night and one of the contacts in the hi/lo portion of the switch had melted down into the plastic a bit and the plastic was gooed up around it blocking the connection. it also kept the switch from alternating contacts to switch from high to low reliably. I'm thinking this overheating must be a design flaw.
I did notice that if I hot-wired the lights direct to the battery they were considerably brighter, I think the engineers undersized the wiring for the load, similar to what they did with the Gen 2 alternator to cause all those associated problems (like, oh, catching fire :)
I'm going to replace the switch - 55 bucks locally. Although I got the hi/lo working again, for now, the detent for the turn sigs is broken and I have to hold the turn switch to activate it, cheapie pot-metal it looks like, snapped in the middle of the detent. I've got two relays and I'll wire them in on a fuse link straight from battery to the lights, and just use the wiring from the bulb connector to energize the relays.
These lights were so bad when I got the car that I hit a deer I couldn't see until I was right up on it, standing in the road. Way dim, and I'm going to either swap front clips (eventually) for an 86 style, moulding be darned, or throw some 4666 bulbs in the sockets with the front plastic removed (they fit snugly but it'll need adjusted by a shop with a beam measuring tool.) 4666 sealed beams might just be the way to go, but it loses the aero look on the front with sunken headlights which sucks, the original plastic does weird stuff to the pattern, which is pretty good from the sealed beams. Tried sanding and polishing the original plastic but that didn't go well. :)
Relays should definitely help by getting that 15-20A load out of the dash/column harness.
BTW this Chilton's I have that covers your year of engine looks to have the same throttle actuator, the ISC [Idle Speed Control] DC motor actuator. The lean-burn mode control switch is internal to the device, not separately changeable. I checked it by hooking an ohmmeter to the switch contacts on the ISC connector (with it disconnected) and hand-actuating the switch, and it was intermittently working. it's odd that that lean-burn functionality is barely mentioned anywhere in the various things out on the Net... I'd likely never have fixed his car if I hadn't stumbled across that note.
I'm thinking an EGR problem... you mentioned the NOx test failure... that generally indicates the EGR system isn't working correctly due to being gunked up with carbon or not opening due to a leaking diaphragm. Since the EGR also affects the idle if it activates while idling or leaks past the pintle, I can't really help diagnose, it's going to depend on which EGR system Ford used on that year's engine. My books aren't much help telling which yours has. Definitely, check for vacuum leaks through the system though, it's a good idea any time there's an idle issue.
I'm not sure if this is applicable... but a roommate of mine had a mid-80s Escort with the CFI setup. His problem was that the engine would idle correctly, but if you tried to drive off it acted just like low fuel pressure, extreme surging of engine power, like maybe a plugged filter or bad fuel pump. We changed the fuel filter and I checked his fuel pressure and it was fine. After a LOT of research I found a note on a mechanic's website mentioning a CFI Escort which they called a factory tech in to fix... turned out that the problem was part of the idle positioning system. The actuator that set the throttle position also had an integrated switch, when the throttle closed down (foot off the pedal), it hit that switch and changed the fuel delivery system over to lean-burn to reduce emissions at idle. His switch was bad, and he was essentially trying to drive with it in lean-burn, which does NOT work well. :) Changed the throttle positioner, about 90 bucks, and he got a working car. Just a thought.
BTW thanks for the info... aside from hose deterioration, I found out why my (recently purchased and being fixed) car would run but not idle... apparently someone hooked the EGR and fuel pressure regulator lines up swapped, so the EGR was opening at idle. Oopsie. Makes sense at least.
On my 88 XR7 5.0L the port labeled "capped" in turquoise in the upside down upper plenum picture... that one has a vacuum line running back to the MAP sensor on the firewall. I've got the non-MAF injection system. The vacuum layout changes somewhat depending on engine and accessory options, obviously.
