Hey there VW2010,
You just described the same problem that I was having, almost word for word.
I just fitted the by-pass valve and now there is wonderous heat billowing into the car, it's amazing the things you take for granted in a new car!
Anyway, one word of advise. Be carefull when using Rad-Flusher. If somebody who owned your car before you used Rad-Sealer to fix up any water leaks that they might have had, as soon as you use a Rad-Flusher, you run the risk of opening up these old water leaks again.
Take the advice of the other guys who spoke of air-locks in the system, that's what I did and it worked great.
Thanks everyone for all your advice on this (my local VW dealer tried to tell me that I needed a new water pump!!). Brilliant website, keep up the good work.