Yes it is supposed to have the ridge, that's what creates the seal. The gasket should not be flush with the block either when properly seated in the hole. Make sure you are putting the thermostat in with temp/spring gauge down into the block. And that the gasket is correctly on the thermostat.

 

Yeah the thermostat is facing the right way. When I look at the old gasket, I don't see any ridge, that's the only reason I thought the new one was different. I might just put on the permatex and let it set for a long time before bolting the housing back on. I'll try the new gasket again. It has one side that is flat. Is that the side that goes on to the block or the housing? Thanks

 

Yes ridge side up, it fits the opening in the housing. Here is a picture of one correctly fitted NAPA AUTO PARTS even though it is from my make and model, on your 350, only shows thermostat without o ring gasket, because it is sold separately. Only one that uses a housing gasket is the 6.5L.


I would not use the old o ring gasket. insert the thermostat with o ring attached, and make sure it is level all the way around, just a little of the o ring should be above the intake/block, then set the housing on aligning the bolts, should have a tiny gap until fully tightened, but do so evenly. No need for any permatex.