Yep..... T-stat and housing replacement immediately. Might as well knock out a new water pump while you are at it, check all your hoses, and if you haven't replaced the radiator in the last 7 years, you will very soon. Consider changing the t-stat housing to aluminum. You absolutely can't use that melted one anymore, anyway. Some folks hate the aluminum ones, I've never had an issue with mine since early 2005 when I changed it.
Make sure you bleed it properly. Sounds to me like you have air bubbles in the system from that leak. Bad bleeding will get ya every time.