Jesus! Just checked up on this thread cause i've been away, this is insane!
Should they not have checked the heater flap thing first seen as the only symptom was no hot air but the car was not overheating? That's what the garage i took mine to did when i had the same problem. They could have just fixed that first with no need to go anywhere near the cambelt and water pump (or break the thermostat housing). Plus, then they give you your car back in an unsatisfactory condition. Idiots.
I'd put all the points mentioned on this thread in a letter or an email to VW Customer Services telling them how p*ssed off you are! Sorry to go on cause i'm sure you just want to forget about it now but it really winds me up how they keep getting away with sh*t like this.