I asked Winfred for some help, he mentioned that the thermostat may not be working properly, I cannot work out why though. If first started when I tried to get my heater working, a few days ago ( http://www.bimmer.info/forum/showthread.php?t=12092 ) and it happened after this. One of the lines had a bit of coolant coming out (maybe?) when I was mucking around with it.

I bled the system (a lot) to no avail. As soon as I pressurise it and put the main cap back on and take it for a spin, (the coolant temp starts go go past 12 o'clock). I think I have air in the cooling system but I cannot work out why it's staying around. the coolant return line is okay, I blew air though it and air was coming out at the overfill tank. The radiator lines look okay, it started mucking around after I played with the heater valves. Should I take the thermostat out and check it? any help is appreciated. When the temp starts rising it comes back down when I take the radiator cap off and bleed it. When I pressurise it, the problems start again. argh