my experience is that you need your compressor
running whether you're using the heater or the
a/c, to avoid clouding your windows.

this happened to me last summer when the a/c
is on and then all of the sudden my windows fogged
up. took a while for me to trace the problem.
turned out i had a defective belt tensioner that
tipped off the clutch of the a/c. I thank steve
brotherton, tech of this forum for the advice.

hope this helps. try to do a search, belt tensioner.
my car is an 89 300E.