You might be on the right track.
Go to your VW dealer and buy a bottle of cooling system cleaner. I think it's a 4L bottle, and the stuff looks a lot like pink coolant. It's the same stuff they use when Transporter and Touareg engines have the same problem.
Pour half the bottle into the system, with the rest water, and get it up to operating temperature and let it run for a while. Drain it, and repeat the process.
You may need to replace the expansion bottle, as the oil can contaminate the level sensor, meaning the low coolant light wont go out, no matter how full or clean the bottle is.
'07 Transporter 1.9 TDI
'01 Beetle 2.0
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