distilled water = no minerals like calcium, lime, heavy metals, etc. (all the stuff that can clog up the passages in your radiator over time).
Also, 100% pure water is a more efficient coolant than a 50/50 mixture of antifreeze and water. However, running just water is asking for corrosion problems, even if it is distilled. I use
RMI-25 in my cooling systems. In the summer, I do not use any antifreeze at all. In the winter I add just enough to protect from freezing, which isn't much here in Houston.
As for the thermostat, I like to use a 180° high flow stat. But then I also drill a couple 1/16" holes to help purge air out of the system when filling it up.