I'm wondering if you have more than one problem.

1. Failed temp sensor or something telling you your engine is always at 40 C
2. Monovalve or something not functioning resulting in no cabin heat

Maybe a combo of things really. Odd.

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1984 w123 300D anthracite (bought from fellow forum user rwthomas1, now approaching 300k and doing great)
1985 w123 300TD white (probably also from another forum member, ebay purchase, my problem child)