Sounds like the monovalve isn't opening when it should. Chad300TDT just had trouble with his monovalve and he had just replaced it, and it was doing goofy things like heating until the engine got up to 2000 RPM, then no heat until he turned the heat off and back on (something like that).

If your temp gauge is getting up to temp after a reasonable amount of driving, your t-stat is probably okay, but if its climbing up to 100 with just mixed driving, maybe the t-stat isn't opening when it should, which could lead to other problems, but that could also be caused by rust/junk in the cooling system.

As for your heating issue, try unplugging your monovalve. When its not powered, its supposed to be open (someone will correct me if I'm wrong, but I'm pretty sure its supposed to work like that). Then turn on your heat and see if you have hot air. If not, maybe look into a monovalve kit. I've never taken one apart, so I don't know what to tell you to look for if its bad.

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1985 300TD-euro 352,000 mi
1974 240D (1?)52,000 mi - has a new home now