It probably is the thermostat, it's a common problem on the 2.5 and 2.8, but try blocking off the radiator first.
Edit: Also flush the cooling system but ensure that you use the correct ant-freeze when re-filling and make sure you don't get any air locks in the system. An air lock can prevent hot water flowing through the heater. When re-filling, have the heater set to maximum.

 

Hi,
Just an update.

Ive changed the anti freeze, fitted the thermostat and also changed the coolant. unfortunatley the temp dial has only gone up by an 1/8!.
I do get high temp when the fan is on low spead but when i increase the air flow the air temprature goes very cold.

regards