2001 XK8,
I turn up the temp on the heater all the way but when driving it blows not very warm at all. Temp guage shows the engine is warmed up good too. When I stop at a stop light it seems to warm up a little more but then cools down again when I start driving.
Anyone else have this problem?

 

There is a small "auxiliary" electric pump with an associated valve to control flow of coolant around the heater circuit. Because it is running pretty much constantly, the carbon brushes on this pump eventually wear away, and it stops working. That is the most likely cause of your problem.
Just do a search on "XK8 Heater Pump" and you will find lots of information

Like this for example :

Heater pump repair.

It's not easy to get at and you can't purchase exact sized carbon brushes. However - depending on your location, remanufactured pumps may be available, or it's not difficult to adapt other brushes to fit.

 

Before going towards the heater pump (a pain of a job), double check the thermostat. Get an OBDII reader (check the cheap ELM327 on eBay), and check the actual water temp reading. The gauge on the dash is very non-linear and is not meant to be helping in this scenario.

Best of luck, keep us posted.

 

In my 99 I have to turn off the intake of air from the outside and just recirculate the inside air. Second thing is to look at the hose on the drivers side of the firewall that feeds the heater core. It is a small hose that is in a tight bend. You will probably find it pinched and no water is getting to the heater. Hose is very short loop and prone to this.
replace hose so water gets to core and be toasty