Need an explanation on how thermostats (are supposed to) work

@Ethyrdude, very good observation! 💡 The reason it is this way is because the ability to auto-light fireplaces came with the base game, and the thermostat came years later with Seasons.  So, when they made the fireplaces be able to have an auto light feature, they didn't make them to work with a thermostat, and it is very possible when they made Seasons they overlooked the fireplaces' auto light feature since not everyone will upgrade their fireplace to this level.  🤭

I have not tested this with Seasons since very few of my many households have the upgraded fireplace.  If you want , you can test how it works by keeping track of their moodlets during really hot or cold days with the auto fire (and try both with the thermostat of and on (and with both warmer and cooler settings). 🤓❤️
My guess is that in the hot weather if your fireplace lights automatically, you can counter act that by using fans or by setting the thermostat to Cooler, to offset the fire place.  Of course, this is jus  my speculation… I could be over thinking it! 😃😳

If I find out anything, I will let you know! 😇

It sounds way more complicated than it should be. In real life, set the thermostat, it goes to where it's set and your done, easy peasy. In the sims, set the thermostat to cooler if hot, hotter if cold and set the fireplaces to on if cold and off if hot and then the ceiling fans, etc. Good grief! Not using fans or fireplaces, just yanked them all and might take out the thermostats too and just give my sims the ice proof, heat proof traits and be done with it. Or disable the temperature effects on sims, even easier. I'm really considering that last one, I hate the cold personally and if my sim is going to be living in Sulani, I want it to be warm. All the time! In my last game the temperature has been changing so many times in one day, it's ridiculous. Sulani is a tropical island so why would it be freezing there? Anyways, that's my rant for the day, lets set temperature to off and be done with it. In the magic realm, its warm all the time so just going to live there and be done with it.

@Ethyrdude, it isn't anymore complicated in the game than in real life.  In real life people set the thermostat to different temperatures all the time!  In the Summer when its hot I put on the air conditioning and in the Winter when it is colder I put on the heater. Easy peasy! 😉 And I also use ceiling fans in the Summer and sometimes fireplaces in the Winter.  Same exact thing as with the Sims!  The only difference it that I don't know anybody in real life that has an auto-light fireplace that lights when people enter a room and turns off when they leave.  And if they did, it wouldn't automatically be set to turn on in the hot Summer! 🤨😃

So the only thing making them more complicated it the auto-light fire places. 😉  It won't help for your existing houses with auto-light fire places, but in the future just don't upgrade them to automatically light. 

It usually doesn't get that cold in Sulani in my game.  Same for Oasis Springs and Strangerville.  Of course, there is always that freak cold wave that can happen. 😉 
And if it really bothers you that much just turn the temperature effects off , like you are thinking aobut. 🙂

Happy Simming! 🥳

@Ethyrdude, my perspective is fine for my game.  I didn't have the problem with the auto light fireplaces since I only have ever done it to two houses, and one of them I moved my Sims out of since their family grew.  It isn't hard at all to turn on the thermostat for me.  But your should play your game the way you want to ! 🙌 I'm happy you are satisfied with turning off the temperature effects! 😎