Possibly just a good flush through of the system would fix it then. Or sluggish Thermostat? (Didn't you change that? Genuine part?)
I fitted a new 'stat, the gauge is now rock steady so I'm sure that's ok. All the other coolant hoses stay warm too. Besides it's warm on a run & goes cold in town, exactly what you'd not expect from a dodgy 'stat.
I did flush it a few times, the water comes out clean. I did find what looked like radweld in some hoses which needed scraping out with a screwdriver so I'm going with more of that but causing an issue because it's in a thinner hose.
Did you ever determine if the water pump was leaking? Or was the leak out of one of the hoses?
I never did trace the last bit of water loss, I still think it's in the waterpump area so I'd always planned to swap that & check the S-hose at the same time. Most of the loss was the matrix pipes that eventually split properly & hid the car in a cloud of steam months ago.
On the long run from Donny on the motorway is was nice and toasty.
The short run back from Aldi to my house (30 mph and 2 miles) it was cold then.
Will run it out today and see how it is.
Aye it does that, you get about 20mins from cold to sit in stop start traffic before it goes cold. I find it occurs about the same temp the rad fan cuts in. A long fast run will bring the heater back, but it can take 5-10miles till the engine bay cools down enough for heat to return.
Oddly enough it's less of a problem in properly cold weather as it takes much longer to get warm enough to go cold (if you see what I mean) then cools down enough to work again much quicker.