1994 Volkswagen Jetta Cracked head?

The foamy/milky look under the cap is normal on some engines. I have a Ford that does the same thing. It happens when you get a little condensation in the valve cover from heating and cooling. It won't affect anything and since you say the oil looks good from the dipstick, the foaming is contained to the top portion of the engine. As far as the overheating, check for t-stat failure, radiator blockage, and cooling fan operation. Post back what you find and we'll go from there.

My pics are pretty vague, but it looks like if you lift and support the front of the car, it is accessible from underneath