Sounds very much like head gasket problem mate, had this with my Audi A4 recently, heater would go stone cold and temp would rise quite a bit. Tried all the easy things first like new thermostat, flushing the cooling system and bleeding it. Only got worse through a short period of time and eventually blew the head gasket completely ! Sounds like your one is on its way out im afraid.
Colin
October 2008