This is one of the issues on the car when I bought it. The temperature control is broken and the heater is stuck on hot :) On removing the console side panel, I found the red Bowden cable that drives the heater valve from the control unit was frayed beyond usable condition. This had jammed the control and I guess the knob broke from being forced. The heater valve itself wasn't jammed and moved reletively freely. I cleaned up the lever on the valve and lubricated it with some silicone grease.
The red cable is part of the heater controls unit. I got a replacement from unit from MG Obsession. Only £6! :) Replaced the entire unit. The SCU is attached to the bottom of the controls unit and needed to be transplanted. It's bolted in with an awkward security bolt. I didn't have a key for it, but succeeded in getting one of them undone using a vise grips. Once that's done the controls could be reinstalled and tested. All moving smoothly now!