You don't want to put it in the lower hose.
I'm sure there is another location that will work. Is there an oil cooler that uses engine coolant? That would normally be on the back side of the thermostat.
Poke around there has to be a spot.
I would not worry about 207. As for the location of your sender, it must be located in the loop of the engine that circulates when the thermostat is closed.
I'm not familiar with the engine you have but typically coolant circulates through the head and heater core and sometimes a portion of...
Is this a multi layer steel gasket? What do the head bolts look like? Can you mock assemble the head in block with no gasket? You can use Fuji paper to check the interface between the two under clamping.
There's about a million ways to go about this.
The block and head were decked? Or are...