We need a little more info to tell you whether of not oil pressure of 40 psi
is acceptable for a freshly rebuilt engine. It isn't clear from your post
whether the 40psi is at idle, or max at driving?
Andy - can you pls clarify whether you get 40psi:
1. Hot or cold engine?
2. At idle or driving?
3. If driving - at what rpms?
For reference, my BJ8 (rebuilt 6 years ago, DWR pump) has:
1. 40 lbs at hot idle (in the driveway when I get home from a long run)
3. 70 lbs at 3,500 rpm on the freeway with temp at 185 degrees F.
If you've got 40 psi at hot idle - then I reckon its fine. Oil pump
clearances are more likely to cause an issue with oil pressure.
But you need a new thermostat if yours only operates at 160F. Engines need
to be running at MIN 175F - Max 190F for efficent combustion to occur, and
to minimise cylinder bore wear. Running an engine at 160F will DOUBLE your
cylinder bore wear compared to running the same engine at 185F. There are no
longevity or performance benefits from running an engine too cold.
Change the Thermostat!