the hood is only held on with a tensioning cable round the back, prob easiest to cut it and buy a new one as they're only about £10 from ebay. you'll see the cable inside the car just about where those corner bits are, if you release the headlining at the back it gives easier access. if you open the hood then look in the boot, you'll see the headlining is hooked on under the parcel shelf supports either side, un hook it and open the hood and you should be able to see.
fold the hood out of the way then cover it with a sheet, then get grinding! this will show you how bad the rust is, if its going to need welding or just treating and paint. once the hood is peeled back you can get access to the 2 clamps that hold the thick tensionign straps for the back of the headlining next to the rear window once these are undone and the hood frame this should help give you more room to work.
in fact, once the above is done the entire hood frame is only held on with 10 bolts if its a manual one, could unbolt the lot and take it off the car. the bolts are hidden behind the plastic trim either side where the locking lever pokes out either side of the rear seat.
theres a good hood replacement guide here, this should help you understand some of what i mean above!
http://www.vwgolfmk1.org.uk/modules.php?name=Forums&file=viewtopic&t=12313
