Hi, had this exactly on my 87 16v. To be sure get two sheets of kitchen towel, fold them double and fiddle and squeeze it into the small gap between the bottom of the centre console and the tunnel carpet. Push it in from the passenger side and then pull it through so it just sticks out of the drivers side. Take the car out for a run to put pressure into it then park it up for a few hours. When you pull it out, hey presto! you will see small wet patches on the towel where the matrix has dripped and you will know 'for sure' its that. The lack of heater is not necessarily related to the matrix leak, that will be knackered heater by-pass valves near the bulkhead in the engine bay. There's a easy fix for this in the Mk2 child/maintenance section with photos, I think its the first one. Do the by-pass fix before you replace the matrix and you will get heat.
If you just replace the matrix you may still not get heat if the by-pass has failed! (most of them do).
Replace the matrix straight after sorting the bypass as the heat may cause catastrphic failure of the matrix flooding the car and scalding you! As I understand VW are no longer doing free fixes and the heater by-pass unit is no longer available.
