Have I bought a lemon?

[blueseamonkey]

Update:

The idle is now much smoother with the vacuum hoses replaced and idle screw adjusted. The smoke might have been WD40 as explained above, or could have been overheating due to blocked radiator - temp gauge was reading ok, but the engine seemed to be running hot, turns out the coolant was rusty orange Manila tap water... A good flush through and refilling with the proper stuff seems to have fixed that.

I haven't got to the fuel filter yet, I am hoping to be able to drive the car to the VW parts shop as its a couple of hours away by bus and jeepney, hopefully only 30 minutes by car.

Eventually I am going to get the aircon compressor looked at too, much too hot here without it!

Can I ask what could be a silly question? The warning light for the catalytic converter keeps flashing, from when I start the car, slowing down when I drive faster. It has done this since I bought the car. What is this likely to mean? Most of the cars I've owned have been pre-cat models so I know very little about them.

[clipperjay]

Does it have a lambda sensor on the CAT?
It might need changing to cure the light? If it not struggling on power.

[blueseamonkey]

I guess its probably a new Lambda sensor then, as power seems pretty good., it's the first Golf I've owned so I can't really compare to other GTIs, but it is pulling better than anything else I've owned except my much missed 1970 Lotus Elan +2, (if anyone gets a chance to drive one of those, grab it, I've never driven a better car.)

Will it make any difference to how it drives though? Or is it a job to put last of the list for when I've fixed everything else? From what I've heard it might not make any difference to the K-Jet system.

[clipperjay]

Well a Lambda can cause mixtures to be richer or leaner as its sensing the temp of the mixture passing through.
The issues I've had with Lambda's are that what actually kills them in the first place? AGE, unburnt fuel etc....
No point in changing it and it goes again at £80 a pop its not cheap!
I would just change out service items like plugs, dizzy and Rota's. Cheap enough if you haven't done it in awhile so to ensure good combustion and no fouling i.e being too rich and killing the Lambda again. 
Running a broken one or unpluging it will default a rich mapp from the ECU to ensure safe detonation so it might be quite thirsty on fuel if not running one, depends if you WOT all the time