Scott,
An interesting point about the "excess" pressure from the outlet-side of the pump. Since classical vertical-flow radiators had their caps on the pressure side, they had to compensate for that phenom. It would be interesting to see the local pressures in a complete system. After all, a water pump reduces the pressure on the intake side, as well as increasing the pressure on the outlet. Local pressure is dependant on the total of pressure drops along the water's path...
I don't think that a large surge tank is necessary in the system if the overflow to the reservoir is at the highest point. A properly designed system (with a two-way cap) will always expell air and return water.
