OK... where to start?
Driving the car along the road, normal revvs, normal temperature etc. and all of a sudden some radiator fluid spurted out from roughly the bonnet catch area of the bonnet and proceeded up the bonnet and windscreen.
Did a full check of the cooling system, no split in any hoses, no obvious radiator leaks, the coolant is in fact water with a very thick sludge in it (not milky white as exampled in the searches of BHG on this forum) which turns to a sediment of sorts when it settles, very dark brown - almost wanting to call it rust but it has a muddy texture.
Checked the thermostat - chucked her in a pot of boiling water and it opened very lathargicly. OK - off to repco for a new thermostat. Tested new thermostat in boiling water also, reacted much faster than the old thermostat and opened much further. Installed new thermostat and rubber seal..
Heres the weird part. The lower radiator hose stays bone cold, even when the engine is up to full operating temperature and all air has (seemingly) been bled from the coolant, the car seems to run fine but the lower hose is cold, right the way up to the thermostat housing, and even that is fairly cool.
We pulled off each hose and checked for blockages. None.
Pulled out the radiator and ensure we could pass water and air right through it without any pauses, no worries there either (although this will not tell us if there is a partial blockage).
We pulled the new thermostat back out again and tested it in hot water again, no worries there.
So... we tested without the thermostat at all and the lower pipe warmed up no worries.. but this time with the radiator cap off we could see the coolant making a whirlpool, which to me indicated that the water pump was in fact moving the water.
Reinstalled the thermostat and still a cold lower pipe.

So, hopefully the above is not too confusing, i tried to be as thourough as possible but to no avail. Our basic situation is this:
-We have a brown thick sludge sedimenting in the cooling system which wont flush away.
-We have replaced the thermostat and thoughroughly tested it. It works in a pot of boiling water but doesn't seem to be working when installed in the engine (yes its the right way around).
-We have a mystery leak (fountain) that is not willing to rare its head again.
-Theres no impurities in the oil
-We are now very confused, initially we thought it was BHG but now i'm not so sure?
If anyone could shed any light on the situation, it would be much appreciated!