Thermostats cost £10-£15 from the VW parts desk. Fitting a thermostat on some golfs is a real doddle (1.6 and 1.4 AEE/AEX engines in particular) as it's in a housing on top of the engine. That means you lose barely any coolant. Other models based on the big block (possibly some 1.6s, all the 1.8s and 2.0s) will most likely need the water pump off to change the stat. Which means you lose all the coolant.
Coolant is about £10 a bottle and they'll need two or three.
Time should be around an hour for a reasonably competent person.
So yes, they're damned pricey. There's no reason to be taking a 5 year old car to a dealer.
As for what the problem is, there are lots of options.
Worst case scenario is that the car's losing coolant because of a blown head gasket, and the bubbling is due to the coolant pressurising. Think £300+ at an independent garage. Head gasket issues are fairly rare on VWs.
Best case is one or several of the following: the rad has frozen, or the air intakes have been blocked by snow, or the thermostat is dead, or the water pump is dead, and that's caused a simple overheat, and the head gasket is undamaged. Diagnosing and fixing that should be a £100 – £200 problem. £200 being new radiator, thermostat and water pump, and a cam-belt for good measure if they've got to take that off too.
The car is most likely losing water because one of the plastic water elbows has warped and is weeping slightly – every hose that comes off the engine block is attached by a bolted on plastic elbow which is sealed by a rubber o-ring. These can warp and lose a little coolant. Another £50 to trace this fault and replace the part.
Whoever does the job, I would recommend specifying they use the correct coolant – you can buy a copy of the VW stuff from factors, or just get it from VW. VW parts are surprisingly cheap, and I'd suggest they get an independent to do it with VW or OEM parts.