Over cooling!

Losing interior heat AND a dropping temp guage, CAN be a sign of low coolant level as well. I know you said it blows out any fluid that you add, but if you have air trapped in the system, it COULD do that. SOMETIMES a heater core is hard to bleed.

Very true. A temperature sensor surrounded by steam doesn't read the same as when it's in water. A recovery system is never a bad idea, and these days the parts are easy to find and pretty affordable.