We are still not sure what you refer to with the exhaust bypass or exhaust diverter.-----------This motor left the factory with a hot water choke on the carburetor.----There is a thermostat / vernatherm assembly below the distributor as well.
The thermostat vernatherm does not control motor temperature on this motor. According to the manual it controls the distribution of the exhaust. After rebuilding it I can see that the verathem assembly is indeed an exhaust distribution control system.