Serious overheating!

[Gary Martin]

Haven't posted in a long time, but maybe you 200 gurus can give me some suggestions. Here are the symptoms.  My car is a 91 200 turbo quattro avant, 205,000 miles. Engine is in great shape and uses no oil. The clutch started a pulsating pedal when pushing in or releasing. Quite sure it needs a new release bearing. Went for a short drive the other day, maybe 10 miles. Half way into the ride, the pulsating smoothed out but a squealing replaced it when pushing/releasing. A couple miles later the car lost most of it's power, maybe could go 25 mph. No warning alerts. No more than a quarter mile later something in the coolant system lets go, spraying coolant on the windshield. Pulled over, turned off and car goes up in steam. The next day I take a look under the hood. The exhaust manifold got so hot, that the turbo bypass hose had caught on fire. 
    So far, the only thing I have checked is the compression and all five are in spec...whew!  Car won't start, it has no spark. So, why would the car get so hot so quickly? And what advice on what to check next in my trouble shooting sequence. 
 Thanks
Gary