My temp gauge dropped all the way down a few times during my drive home, then eventually didn't move.  My heat was working great so I am assuming its the sensor. 

It appears this is a fairly common occurance, for me it started at 167k, not bad.

I found a great writeup at http://www.inmud.co.uk/page28.htm

For reference sake I am replicating it here with my own notes.

Tools needed to change this sensor:
A small flat blade screwdriver and 10 30 minutes of your life

Parts needed:
Temperature sensor :    VW  059919501A
Rubber o-ring:                VW  N90316802
Spring clip:                     VW  032121142
Up to 1 litre of G12 coolant plus distilled water.

You can get the parts very cheap if you do a search online rather than going to the VW main dealer.  Fairfield VW total cost was about $35 at the time of this writeup, although I already had extra coolant.
Let the engine cool for as long as you dare, you can still burn yourself after a few hours but it's up to you.
Release the pressure at the expansion bottle.  I squashed a radiator hose and resealed the cap to put the system under a small amount of vacuum

Locate the temperature sensor below.

Get the new sensor ready with the new o-ring on the brass end. (Note the picture does not show the new o-ring installed)

Pull the plastic clip downwards from the underside (use a mirror if you wish), this was easier then I expected, you can feel the clip with your fingers and moves with a light wiggling.

Pull the complete sensor out towards the rear.  It will loose about one pint of coolant in 5 seconds.  When you take the old sensor out check the o-ring came out with the sensor if not get your finger in and pull it out. 
Plug the hole with the new sensor, you can add some vasaline to help it seal but I never needed it.

This is difficult due to the room you have to work with, my old o-ring was stuck inside and I had a plastic jug trying to catch some of the coolant (similar to this).  With a setup like this link I suggest waiting for the coolant to drain, I collected a little under a 1/2 gallon then do the swap of the sensor.
Refit the plastic clip to retain the sensor.

Remove the sensor plug with a small flat bladed screwdriver.  Push it towards the sensor before releasing it.  Try on the MAF sensor first as it uses the style of clip.  Some people do this first but I found it is easier when you can see it.  I had a hard time pulling the sensor from the plug, i needed a lot of light and watched the clip raise up before tugging and wiggling the sensor out of the plug. Along with a tip from paramedick: Push the plug TOWARD the sensor. Then push on the clip and pull it off.
Refit it to the new sensor.
Replace the lost G12 coolant and distilled water as required.
Wash area where G12 has been (more then you think, messy!)