You had better be looking for another cause... VW designed the thermostat bellows and the cooling tin flaps so that they OPEN when the thermostat bellows fail. If you look at the bellows when it is cold, it is collapsed and under pressure trying to expand. But when it is heated it expands. When the bellows fails it automatically returns to the expanded state. So this is not the cause of your failure...But like fatalifeaten said
If I were a betting man, I'd say you spun the rear main and blew the rear main seal (the oil you were seeing was coming from the rear main seal and if you pull the engine you'll find a bunch in the bellhousing, and your clutch is probably toast.
If that's the case, you're done. Time to rebuild. Hopefully it didn't walk a lot and bash the saddle up to the point where you have to replace the case. You may be looking at an align bore and thrust cut though, have a machine shop that knows VW's check it out once you get it apart (if needed)
You mentioned you put 50 miles on it, was this a fresh rebuild or did you mean you've only owned it long enough to put 50 miles on it? If it's a rebuild, did you have it done or do it yourself? If you paid for someone to do it, go raise hell. If you did it yourself, maybe you missed something?
My idea here is if it was a recent rebuild (no matter who built it) I would bet that the little pin the locks the bearing in the main saddle was left out. As the bearing gets seated in the case the only thing that keeps it from rotating is that pin...True it will be held in place by the crush of bolting the case halfs together, but this will only last for a short while...about 50 miles. Olspeed
66 Ghia, "Dexter" 76 flat window Beetle
It's not a Car it's a VolksWagon!