Hm, it does seem likely that my pump may have been air locked. It definitely showed all the symptoms of that, as coolant didn't seen to be going anywhere in the car earlier this week. When bleeding it this time I followed these instructions to the letter:
http://www.esatclear.ie/~bpurcell/318ismaintenance.html#bleedThe coolant was just the usual 50/50 mix every time. I cleared that bleed passage when I originally installed the new thermostat. It was pretty nasty previous to that. I didn't drill into the thermostat, however I was considering doing that if I ended up taking the thermo out again. As of right now it seems like I have great flow throughout the system. Both hoses get hot, as opposed to only the driver side one previous to this last bleeding attempt.
Basically I've decided that the M42 is a very simple engine to bleed. It just takes patience and a lot more coolant than you would expect for this tiny 1.8L.