If its steaming, using water and making grinding noises STOP DRIVING IT AND GET IT TO A GARAGE. If youa carry on you will potentially wreck the engine.

Take it to a different garage, its clear yours did not have a clue.

Sounds like the cap may have lost its ability to keep the system pressurised. Without the required pressure in the system the boiling point of the coolant is reduced (to about 105C). Water may be boiling away as a result (probably around the exhaust valves), escaping from th ecap. Adding more water and diluting the coolant further (towards being only water) makes this worse because the boiling point of water is even less (100C) and so it gets worse.

Presumably this is a petrol engine? Is it turbo (even higher exhaust temperatures!!!)?

The gauge varying like that may indicate either an air lock moving round or steam bubbles (no coolant round the temp probe).

The temperature gauge has been going all over the place, the fan is on pretty much the whole time I'm driving and stays on for about 2minutes after I turn off the engine, despite not being that hot.

Do you mean that the radiator isn't getting hot? Have you checked that you're getting a temperature drop across the radiator? ie the lower hose should be cooler to the touch than the upper hose?

If the coolant is being lost via boiling out of fthe pressure cap then most of what is lost will be water since water boils much more readily than antifreeze. So you can top up with water. Antifreeze only raises the boiling point of the coolant very marginally anyhow.