Hi,
You're absolutely right. At some point, VW or the manufacturer of the control unit changed the software so that it no longer displays the 6 or 7 different fan settings statically, but instead dynamically shows the actual fan level currently selected by the controller. My G III used to behave like your G IV from the year 2000.
I observed that even in the older systems, the fan speed would still vary, even though the lowest setting was selected and displayed. Therefore, in my opinion, only the display has changed, not the actual fan control.
"On my 2002 G IV, I use the following method: When the engine is cold, I set the target temperature to 18 degrees (the lowest regulated temperature). As soon as the system starts running the fan at a higher speed after a short drive, I manually set the fan speed to the lowest setting. I do this until the engine is warm. This works quite well so far. Once the engine is warm, to get any heating effect, you either have to set the target temperature higher or set the fan to level 4." From then on, everything will be regulated again.
For future generations, it should simply be easy with just one button for TDI winter operation, so you don't have to constantly mess with the automatic transmission

.