I have read about this drilling being done and I like the idea but I don't know exactly where to drill the hole. I see all sorts of advice for and against such practices on the internet and too many pictures to know what really works. What is the "right" way to do it? Can you post a picture please?
Some say to use a 1/16" drill. I use a 1/8" drill bit- my choice, and I drill 2 holes. I cannot see why anyone would be against doing this. The biggest benefit is that it allows trapped air out of the system after you install the new T-stat and refill the cooling system. The other option is to leave the radiator cap off and run the engine to temp and you will see the coolant and air bubbles pass by. This "burps" the system. The coolant level may drop some as well, so add a little more.
But if you did not get all the air out of the system, it could get trapped and take time to work itself out. The small hole in the T-stat allows any trapped air to escape, even if the T-stat is closed. If you were to develop a large air bubble under the T-stat, the engine coolant may not reach the T-stat valve and heat it up enough to open the valve and let the air escape. Again, small drilled hole resolves this to never become a problem.
The second benefit is that if the T-stat shuts closed on you, the engine will boil over pretty quick. With the T-stat stuck, it caps off the upper radiator hose and the boiling water will erupt back through the radiator and out the overflow. The holes relieve some of the pressure developed when the coolant begins to boil. In my experience, the engine is going to boil over no matter what if the T-stat sticks closed or fails to open, but those small holes allow some pressure to get through and the overheating is more controlled/slower and gives you a little more warning/time to get to a safe place rather than "right now" because there is steam coming from out of the front of your car.
Some T-stat's come from the factory with a "jiggler valve" and some aftermarket companies make them as a choice as an upgrade. Large diesel trucks all have the T-stat with the "jiggler."
Pictures show an aftermarket T-stat with the "jiggler" valve. You can see where the hole is to give you an idea of where you can drill a hole in the ring on the T-stat if you decide to do this. The hole is kinda close to the valve. I usually drill my hole further out on the ring, about half way in the middle, or just a little outside the jiggler you see in the photo.