My experience with the 1.6 VW diesel engine is, if the head gasket blew, likely the head is warped (fortunately, ever so slightly). With a quality straight-edge, a machinist needs to check how bad it is warped, if any. 0.004 is the max. If it is warped 0.004 or more, that's the amount that should be milled off. It is extremely important that the mill leaves the surface slick (no grooves). Also, the shields/inserts need to be milled in place. My machine shop operator pinned them to make sure they did not move during the milling process.
Sure, there will be those who say you cannot mill that head. Well, I'm here to tell you it can be done and with success. If my memory is correct, I think the Bentley will say not to mill the head.
You need new stretch head bolts. You need to identify which engine you have and torque the bolts accordingly. Some required loosing the bolts at 1000k miles (specs set out how much) and then re-torque. Also, seems there was a flyer from VW that modified head bolt torqueing specs.
As someone already stated, piston protrusion and distance to the valves needs to be evaluated. However, I seriously doubt the head has been previously milled enough for that to be an issue. Valve seats can be cut a bit to allow the valves to go down a little. Depending on whether it has solid lifters or hydraulic lifters, the end of the valve stems may need to be cut to match seat cutting if required.
TDC timing is critical, but not that difficult to set.
Yeah, you do need a Bentley Manual..