" BUT WHY WHY WHY WOULDN'T VW PUT A TEMP SENSOR ON THE ENGINE,
INSTEAD OF IN THE COOLANT????"

Assuming that "on the engine" means in fact a cylinder head temp
sensor, then my simple answer is nobody else was doing it commonplace
like they are today, CHT sensors didn't catch on until the the mid 90s
for most of the industry, and many not even then(look at GM throttle
body injecting primitive shite monsters into the 00s). Even with that,
early 00's is when we see some proliferation of enforced operator
countermeasures such as selective cylinder cut on CHT overrun etc(even
then you can only go so far as Robert pointed out.. ie passing a semi
after warning lights have come on with no coolant and then having a
power cut killing the occupants and triggering a lawsuit).

It seemed to follow the cost schedule of the ability to offer enhanced
protection vs. the cost of not doing so. This includes competitive
advantage in pre-sales(nobody else doing it provides no motivation to
do it), warranty work(how often do you make it to term?), and brand
perception(hey look at us, we care about you).

Usually if you have to question something done by an OEM, the first
answer is money, and so is the second.. maybe on the third you hit
legislation(which typically boils down to money as well) and
eventually somewhere in the double or triple digits you'll find things
like "this is a better way to do it", or customer value as drivers.

Just as someday another list will ask why why why didn't XYZ use
prognostic telemetry for operator and vehicle protection in their 2019
Dorrstop GTS, you ask a question that never seems to yield evidence of
proper application of common sense in current context... the
retrospective kind.

Jim Akiba