I've pulled the heads recently on my 90 Vanagon because the water seals 
had deteriorated to the point of leakage.  These are rubber-like seals 
that fit between the heads and the water jackets surrounding the 
cylinders.  The cylinder barrels actually slip into the heads and are 
sealed by o-rings to keep the water out and the compression in.  

The job of replacement of the o-rings and seals can be done with the 
engine left in the car after removing the intake and exhaust systems, 
hoses, and various pieces of sheet metal from around the engine.  
Basically, it is fairly straight forward if you have the manual to follow 
and some experience [ I did it first on my 84 Vanagon several years ago].

The problem with the water seals deteriorating is supposedly due to the 
breakdown of the anti-freeze protection allowing corrosion of the seals 
and metal where the cylinder head meets the seal, i.e. around the edges 
of the head.  The surface becomes pitted to varying degrees depending on 
how long the corrosion has taken place.  If it's not too bad the heads 
can be resurfaced and re-used.  If it is bad then they must be replaced 
because they will leak.

In my case I cleaned up the affected areas and installed the new seals 
and o-rings, using an ample supply of appropriate sealant on the surfaces 
contacting the seals, then bolted it all back together.  I also cleaned 
up the valves and seats while I was at it.  

The total cost to me was about $250 for the engine gasket set--actually I 
only needed 2 head gasket sets.  Could have save about $50.  If a dealer 
do the job for you be prepared for major bucks -- $1100 I was quoted, and 
that was assuming my heads would be re-usable!

Results:  Success!  No leaks, and the engine runs smoother than ever!

I thought about sending the bill to VW because these cars should NOT have 
a problem like this!  But I figured they'd never do anything about so I 
didn't.

Hope this helps.

Jack.
89 GTI 16v
90 Vanagon GL
[+87 Buick !]