Faulty T-stat or...?

you have no coolant touching the sensor, that's why it's reading low. The sensor needs to be surrounded by coolant, for an accurate reading. Take care of the obvious issue NOW, then troubleshoot again when everything normalizes.
Chances are that your exhaust gas heat exchanger is leaking; assuming you haven't damaged the engine by running it like that.

Hope this helps......

PS there should be NO air bubbles in the upper radiator hose when you squeeze it - that would indicate a leak somewhere that's allowing air into your cooling system making it less efficient.

 

You can't squeeze the hose because there's no coolant in there, warming the rubber and softening it.
Do you have a flow though coolant bottle setup or an old school reservoir? If old school reservoir, check under the radiator cap for coolant.

LET ME BE CLEAR!! Your running your engine without any coolant in it, burning up your motor !!!

 

Gen 4 Prius has the flow through coolant bottle design.

 

Great; hopefully no damage has occurred....
Keep an eye on coolant levels for the new few weeks as more air will eventually works it's way out of the system.

Good Luck.....

 

No, low engine coolant is not caused by the recent lower ambient temperature. You have a coolant leak somewhere that needs to be located and fixed.

Who did the exhaust gas heat exchanger bypass?