I am trying to find the reason for the high NOx on my 1984 GTI Rabbit.

Cylinder #2 exhaust valve clearence is .30mm (measured with the engine hot), the hot spec is (.40mm - .50mm) , I also measured cold with the cold spec and it is out the same amount .10mm (actually it is out .20mm as you subtract the measured clearance from the specified max clearance (.50mm - .30mm = .20mm)

will this cause a hot spot that might then increase combustion temp that would increase NOx?

Let me add that the NOx is 1091, the California emissions spec is 845 max