You are right, it is the heat that de-ice the windows, but this heat + the humidity from your body/air condenses on the windows hence the fog. That is the reason why you had to drive your beetle with one hand on the windshield. To dry the air inside your car, you need to have the compressor...
The reason this happens is because if you turn your window defrost/bi-level setting in the winter time without your compresor running to dry out the air , all your windows would end up fogging up. Hope this helps.
Yes, it used to be Sunflower. I got my MSP at sunflower also, what color is your car? I did not know Bob Sight was at 135th and State Line, I'll go check them out this weekend.