Put the milk into the pot. Put pot on a stove burner and set heat to 3 (on a scale of 1 to 9). Heat for about 10 minutes, stirring frequently. You don't want it to scorch! Turn heat down if it's heating too fast.
Turn heat down to 2 and heat until temperature reaches 185 degrees or so. (Just be sure it gets over 180.) This takes me 30 to 40 more minutes. Stir frequently and test temperature frequently. To test temperature, hold thermometer tip deeply in the middle but don't touch the bottom. As you stir, you will probably feel the milk starting to stick to the bottom of the pan. This is not a problem as long as it doesn't scorch badly. Just brush over the crust on the bottom lightly. Don't scrape it up as you stir.
Near the end of the above step, stir in the dry milk powder. (I do this when the milk is 170 degrees more or less.)
While the milk is heating, fill the thermos with boiling water to get the thermos good and hot.
While the milk is heating, near the end, fill your sink with a few inches of ice water. You'll use this to speed up the cool-down process described below.
When the milk gets to above 180 degrees, remove from heat. Set the pot into the ice water.
Cool the milk to 120 degrees. Stir frequently and test temperature frequently. This takes me 5 or 6 minutes.
While the milk is cooling, put the yoghurt starter into the pint jar.
When the milk cools to exactly 120, immediately remove the pot from the ice water and very quickly dip out about a cup of the warm milk and add it to the yoghurt in the pint jar. Shake well to mix thoroughly. Work quickly so the main pot of milk doesn't cool much more.
Quickly but thoroughly stir the yoghurt starter/milk mixture into the pot with the rest of the milk.
Discard the hot water that is in the thermos.
Pour the warm milk into the warm thermos and put lid on thermos.
Leave for 11 or 12 hours to incubate/ferment. Can be as little as 6 hours, per Melissa Clark, but the longer it sits, the thicker and tangier it will be. I do the full 12 hours.
Spoon the yoghurt out of the thermos and into the containers you want to store the yoghurt in. Put into the refrigerator to chill thoroughly. The yoghurt will continue to thicken as it chills. (You can cool it in the thermos container if you wish but be sure to first replace the lid with something that doesn't insulate.)
You might notice some thin clearish liquid separating from the thickened yoghurt. This is called whey. It is to be expected. You can drain it off and save it to add it to recipes if you wish. I like to drink it. It tastes good and is nutritious. You can strain off more whey on purpose and make Greek yoghurt if you wish. There is plenty of info on the web about how to do this.
Important: Save 1/2 cup of your finished yoghurt to use as a starter for your next batch.