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I've always loved golfs and this is in good nick. Hate to get rid. Mileage isn't very high for a diesel either. I have toyed with the idea of putting a modern engine in but that seems a shame in a sense. Although a more reliable modern engine would be nice. These are pretty simple which is a bonus. The rads from VW Heritage are only 40 quid and their stock must be pretty decent. Once I get it back from the mechanic and fit the new thermostat I'll completely flush it all including heater matrix etc and see if that helps.
Yes, some modern rads are shite. Check for fakes and unbranded never heard of rads. An example is getting motorbike, honda NC30 water and oil rads from china. Very hit and miss while car parts are being copied and are poor quality. There are lots of ways that rad makers are trying to prove that their products are genuine.
The cold internal heater rad does not inspire confidence too. Is it an air lock and is that air lock caused by a blocked rad? When you take the thermostat out back flush the system in the opposite direction to the normal water flow. Maybe disconnect the heater water pipes and back flush that to see if there is a blockage?
If the body is in good nick I'd try my best to keep it as decent MK2 golfs are only going to go up in value.