I hope it's a hanging caliper. If your bearings are so bad they're heating the lug bolts, you'll probably need a new spindle since I'd bet they're fused to it.
Jack the front up and see if there's any play in the wheels.
Good luck. I hope your troubles are an easy fix.
EDIT: It would be likely to have both calipers freeze due to really beat brake fluid. I'd also change all the brake hoses while you're in there. Replacing the rotors will allow you to actually see and replace or repack the wheel bearings too.
Congratulations on the purchase. Do you have a Wagon or are you referring to a turbo diesel sedan? Post pics when you can.
