Pros and Cons. Read the "Automotive Repair" paragraph here.
Yes, it is the correct place, if your care to risk it. I suggest you drain the system (at least partially), then add the leak stopper, then top up with coolant, to get the stuff to the heat as quickly as possible - it only works when it gets to the hot metal, so just pouring it into the reservoir isn't going to do much.
K-seal doesn't block things up - I've used it successfully before - the older radiator sealants used to contain large particles that would sometimes lodge where they shouldn't - it's definitely not the case now.
I'd also recommend Holts Radweld - I've used this to seal up some fairly large holes in a radiator.
I believe that VW recommend adding in a radiator sealant as part of their servicing regime.