2002 Sport Trac - 4.0 L Engine
The engine overheats at low rpms but cools down at higher rpm, leads me to believe the thermostat needs to be replaced. I am not sure what the stock/best thermostat is for this. It is a daily driver and is driven regularly. Is 160 degrees the best?

 

Considering the one thing affected by engine RPM related to coolant temp could be the water pump.

The thermostat should open and close at the same temp if working correctly.
A thermostat with an opening temp of 195 degrees does cause the engine to operate more efficiently plus provide better cabin heat in the winter.
The higher temp helps with the combustion in the cylinders and contributes to less pollution. Also helps boil off moisture that might happen to accumulate in the engine oil.

 

I would check for an airflow issue, that would act up at slower speeds.. Fan, radiator cooling fins plugged. It is very rare that a water pump impellor would slip on its shaft and cause overheating. I never seen one and that would actually cause a water flow issue causing higher temps during high speed operation . I doubt that is your issue.

 

Have seen a few instances where the water pump impeller was so corroded that parts of the impeller were gone..