Hi,
I have exatly the same problem with my ´97 A4 1,6 Avant.
No hot air inside the car. Only when running at 4000 rpm and above, a small amount of heat is generated.
My mechanic have changed both the thermostat and the water pump (because of a theory of lack of pressure on the system), but with no luck at all.
There was a small crack in the pump wheel but it couldn't be the problem.
After this my temp. instrument is showing every temp. between 90 and 110° .....
Audi DK claims that the cleaning fluid for the cooling system has no effect at all, and therefore recommend that the heater block is re-newed, which will cost a fortune.
My next step will be to flush the heater block with pressurized water myself, to have an idea of what the f.... is wrong.
I will post you the result later..
Wish you all luck with your A4.
Michris, DK.