Mine used to sit half way on the gauge, and so did my driver. On both after I had the heads off, the temp gauge dropped down to the 1st line after the white zone

I believe this is because all the coolant holes in the gaskets were pretty much blocked up, and after coolant flow was much better around the engine.
This wont be the cause of your poor heaters though, its more likly to be a problem with the bypass valves VW fitted! Yopu can get 2 brand new uncut hose from GSF for about £10 each, or you could just remove the valves and fit some copper pipe in the gap.
There is an increased risk that the matrix could blow however, but its not very common. Changing the matrix isn't too bad, but very fiddly! There is a how2 in the maintenance+info section, the only thing I'd add is that remong the dash makes the job much easier!