The heater valve is vacuum operated and is used to shut the coolant off from the heater matrix when the heater is set to the cold position and is located here:
The original valve is probably of GM origin and is known to be used on the Holden Commodore, Volvo 740, Fiat Spider and XJ40. It probably looked like this when new.
Being metal, it tends to rust through, often from the inside out and can deposit all the coolant spectacularly quickly. This not only occurs in the Elan but most Volvo 740s too and theirs is under the dashboard. As a temporary fix, it is possible to replace a leaking valve with some suitable pipe, remembering to blank off the vacuum pipe first.
The internals appear to be very restrictive, so this may explain why the heaters in some cars are not very efficient. Fortunately, ScanTech in Sweden make a reasonably priced replacement which is a lot less restrictive and is mostly plastic.
The part number is 51.7896 and these can often be seen on eBay and elsewhere and can range in price from GBP20 to GBP50 or more, however in the UK they can be bought direct from ScanTech's distributor, Braydon Motors who sell them for around GBP20.
EDIT: 31 March 2015 Fredjohn
Scantech website no longer lists this part 51.7896.
However, a similar item is still available on ebay at parts_monster and it is still available from Braydon, ebay address above. But search for "heater valve" rather than the part number. Still priced around GBP20.