Fan Switch Problems Fix
A common failure with these cars, judging from the rec.*.vw.watercooled Usenet newsgroup is the fan speed switch. If you notice the fan getting flaky, intermittently working, working on some speeds working while others aren't, and the switch knob is getting HOT, it's a good chance this is the problem.
I'm going to get a bit techy for a moment. You don't have to understand the techy stuff, but reading on here might help you confirm this is your problem before you go to the dealer and drop US$80-90 for a switch assembly you don't need. But if you don't know Watt from what, you might wish to skip to page 2.
What seems to happen is the switch's internal resistance goes up and basically turns the switch into a heater until it melts enough to become intermittent, or the wiring harness in the dash over heats, physically distorts, and then makes an intermittent connection. Here's what mine looked like. Note that the bezel has already been removed.
The melted spot on the knob shown at about 10 o'clock. That's where the wiper for the switch is. The wiper is the contact that moves along the stationary part of the switch. Notice it isn't even really enclosed, much less sealed. Get some dirt and grunge in there, and it'll eventually melt. I suppose hitting it with some contact cleaner every oil change would prolong it's life, but who wants to use those kind of chemicals around plastics that may or may not tolerate them?!?
Now that you've figured out this is your problem, you'll probably be asking yourself, “Self, what do I do now?” Well, here's your answer.