This is from the '92 manual, however it's functionally identical to the routing on the 1.8 cars with the exception of the tiny little line on the intake side (the 1.8 cars have an oil cooler here, and the source is from the back of the head rather than the intake manifold)
The water pump inlet is at the front of the engine on the left side. There are two basic routes:
1: Water is pumped up into the front of the engine, where it flows upwards and backwards, exiting at the rear of the head. It goes through the heater core, and then goes directly back into the water pump inlet through what is commonly called the "mixing manifold".
2: Water is pumped up into the front of the engine, and exits directly out the thermostat in the front of the head, goes through the radiator (top to bottom) and then goes back into the engine at the same mixing manifold mentioned above.
The fundamental deficiencies here are that:
A: when the thermostat is open, a large quantity of water goes out of it without having first passed through the engine, and
B: Water exiting the heater core goes directly back into the water pump, regardless of temperature.
Now, there was a bit of a redesign in 2001, which resulted in a head gasket that in theory should mitigate fault A, by not permitting water to flow straight up from the pump and out the thermostat. Much discussion on that here: http://forum.miata.net/vb/showthread...ghlight=gasket
A common modification on these engines is to perform what's known as a coolant re-route, where the thermostat is relocated to the rear of the head and the front outlet is blocked. This restores the flow of the system to that for which this engine was originally designed, back when it was in a FWD car. This has proven highly effective, though I am concerned that due to the aforementioned gasket redesign, it could have negative consequences for '01 and later engines.
There is much discussion of this concept here: Peter Pan Coolant Reroute
(I caution you, most of that thread consists of us making fun of a mentally handicapped fellow who went by the name of Hyper / Peter Pan, however there is some real tech gold buried in there if you read the whole thing.
The line which you identify as a bypass from the thermostat to the water pump inlet is precisely that. It's there to keep coolant flowing around the bottom of the thermostat (where the wax pellet is) at all times, to ensure that the thermostat opens when it's supposed to.