[Mysterytrain]

My experience with autoheat is based on what I have read on this forum but he basics of the system are pretty much the same as the manual setup.
There are two damper boxes under the car. They are fed hot air from the heat exchangers. This is old VW technology with the dampers controlled by spring wire cables that run back into the car. On a manual heat system the cables are connected to a pair of levers with red knobs between the seats. Lifting the levers opens the dampers and allows the heated air to enter the car. With the levers down the dampers are closed and the heated air is dumped under the car. On cars with autoheat, the opening and closing of the dampers is via the 1-9 dial on the top of the heater console.The damper boxes [also known as flapper boxes] commonly rust and can be stuck in the open position. I would crawl under the car and have a look. Make sure they operate freely. There should also be a return spring on each one. If that all checks out then you need to examine the heater console linkage. There is a servomotor in the heater console box that operates the flapper boxes. You can access the control linkage via the side panel doors on the heater console...its easier if you remove the seat. The Bentley manual covers this stuff pretty well. Its common for the control arm from the servo to disconnect itself. I'm guessing if that was the case then the return springs on the flapper boxes would pull the dampers shut and dump the heat under the car...and you would have a no heat problem but with rust anything is possible.
As for the electronics, the fans have 3 speeds with the defrost setting is the fastest. There are also a couple of sensors to monitor or throttle the heat. One sensor is located on the driver's side flapper box. It's function is to prevent the heating system from operating until the heated air reaches a set temperature. The factory didn't want to blow cold air into the cockpit. The other sensor is mounted in the dash or above the rear view mirror and it monitors the temperature in the interior and sends that information to the heater console, allowing it to throttle the fans and flapper boxes to maintain the set temperature. Hope that helps.