1999 Peugeot 206 heater blowing cold only

Not really familar with that heater set up .Have you pulled the outlet pipe( which you say is cold ) from the matrix when engine warm to see if airlock or water flowing through ? On some cars you have to take the revs up a bit to get a good flow .The other thing is if it has a mixer flap on heater you will have to check that is operating or move it manually to test .Few suggestions here on a later model , might help

http://www.peugeot206cc.co.uk/viewtopic.php?f=23&t=10268

I had this on my wife’s 206cc the only thing you don’t appear to have tried is the water pump. The symptoms I got were the car would run fine but the top rad hose would get quite hot with the bottom rad hose rather cool and the heater matrix only got luke warm water. I bled the system and replaced the thermostat with no change. My mechanic said he thought it was the water pump and when he replaced it there were no fins on the pump impeller, it was just a star shaped flat piece of metal that spun pretty aimlessly in the water. Replacement is not an easy job. The pump is located on the left of the engine and is driven by the cam belt. You need to know what you are doing to replace the pump and/or belt as incorrect fitting of the cam belt could result in engine damage