Fought with this for a while on my wife's 1.8L... It is air that get trapped in the heater core. you likely had the cooling system apart to do a thermostat housing or something like that. The problem is that the fill point on the reservoir is well below where the heater core is inside the dash an there is no way to get inside the dash to bleed the core.
Here is how I fixed it...
1. Buy, borrow, or build a "spill proof funnel" to attach to the reservoir. If you jerry-rig one like I did, you will also need a small screw to put in the overflow opening.
2. Jack up front of car a bit.
3. Remove reservoir cap and install funnel/screw. Add Dexcool, not a precise amount, but enough to fill the reservoir.
4. Run engine for a long time with the heater on hottest setting and fan on low. It needs to get up to temp and "boil out" the air at least 4 or 5 times. This goes a bit quicker if you can have someone hold the rpm around 2500 to heat it up faster.
5. Shut down engine, drop car, and fill reservoir to proper level. I recommend a bit more Dexcool than the indicator line due to the elevation of the heater core.
This seems like it takes a long time, especially in cold weather, but there is nothing else you can do.
