Heater not Working Properly

[BZG Wagon]

Supposed to go on holiday next week - so im trying to dectuct what this problem could be - as no one can look at my car until 7th Jan.
I just drove to work - 30kms down the motorway, and when I got to work, the top radiator hose was hot - untouchable, but the bottom one was only just warm. I take it water flows through the bottom hose, through the engine, and back through the top? Im also guessing the thermostat is the thing below the distributor cap (approx).

Does this sound like the thermostat is not opening properly?
Could by radiator be blocked?
Where does the temp gauge usually sit on a 20V(mine is just below 1/2)?
The temp drops when ever the heater is turned on full.

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I also took the cable of the heater tap, and the tap moves freely, but when I move the in-car thermostat, the cable connecting to heater tap closes completely when it is at 25 degrees.