You said that you removed the hydronic heater and plugged the hoses. The cabin and water heaters needed to be in-line with one of the coolant circuits (by-pass or primary). Based on your photo, it appears to be in the by-pass circuit. When you plugged the two hoses you stopped all coolant flow in the by-pass circuit which not a good thing. You need to join the two hoses together to allow the coolant to flow.
A completely blocked by-pass should not cause overheating of the engine once it is fully warmed up but can defiantly cause problems while the engine is coming up to heat because the thermostat is not getting water flow from the engine. The only flow that it will get is through the tiny hole in the thermostat that is designed to let out air bubbles when you fill the system.
As jssailem said, your removal of the water and cabin heaters, in essence removed two heat exchangers from your system which would supplement the cooling in the raw water heat exchanger and mask a partial blockage there.