I've got exactly the same problem with my 1990 GTi 8V.
The weird thing is I used to have a way to get round it.
What I used to do it turn in the ignition, wait for the light to stop flashing, then start the car and it would not flash at all.
Then this method stopped working, and I could stop it by starting the car while it was flashing. (Either I did this or a quick smack on the top of the dash would sometimes work)
Now nothing seems to stop it. My temp is fine, except my heater doesn't work, gonna read the post on the maintenance form about replacing it.
If you do find a way to fix I'd love to know what you found out. If I make a progress I'll post it here.
!m!