Greg:

DO NOT, under any circumstances, mess about with the fuel injection linkages or pump without a manual and great care -- it's possible to seriously damage the pump by attempting to adjust mixture while running, and if you get the linkages messed up, it will be impossible to get it to run right. Non metered airflow mechanical injection after all!

Your problem is very likely seriously crudded up fuel. Drain the tank and put in about 6 gal of fresh fuel. Add a bottle of injector cleaner (the good stuff, RedLine, may not be available in Down Under, but I'm pretty sure Shell Techron is). Jumper the fuel pump relay and let it run a couple of hours before attempting to start. This will often loosen up the slime in the injection pump and get the fuel rack moving again. It may help to remove the injection lines at the pump and crank the engine with the gas pedal to the floor to flush the plungers, too.

If you can then get it to run, keep adding some cleaner to each tank of fuel to clear the slime from old fuel residue -- when the volatile part evaporates, you will be left with some thick, slimy stuff mostly comprised of detergents and additives that isn't ignitable. This will stink to high heaven and foul the plugs, etc.

Mostly likely, alas, you have a stuck cold start valve and a stuck fuel control rack. The latter can require an injection pump overhaul to free it up. Hopefully, it's only dead, unburnable fuel.

For the heater, the valves are stuck. Remove them (instructions on this site, do a search) and clean them, then re-attach the heater hoses properly and do a citiric acid flush.

Peter

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1972 220D ?? miles
1988 300E 200,012
1987 300D Turbo killed 9/25/07, 275,000 miles
1985 Volvo 740 GLE Turobodiesel 218,000
1972 280 SE 4.5 165, 000 - It runs!