Went to tahoe yesterday (temp 30 degrees), got there no problem. when leaving, water temp light flashing, but car running fine. No over heating. Any ideas?

Common problem on passats - this fault is electical. The real temperature guage to watch is the needle. Your fault might disappear if if you switch off the ignition and restart car or remove top up cap on expansion bulb and top up - usually a small amount - a cup full.

The light on the VR-6 will flash on low level and stay on with an overtemp.

VR6 usually overheats if the thermostat is faulty.

This was happening to My Passat 94' GLX VR6 too. It would flash, and when I turned off the engine and then back on again the blinking stopped. Untill today when my heater core broke. Im sure I looked like Cheech and Chong driving with the windows down and white steam bellowing out.

Good Luck
Pain

Try tapping the reservoir the sending unit sometimes sticks. Let me know if this works please.