Similar combination to the '62 Chrysler 225 slant-6 (aluminum block version). Cost and manufacturing considerations necessitated the use of a common iron head on both the die-cast aluminum block and the simultaneously-produced iron block version of the 225. The aluminum 225, unlike the first iteration of the Vega engine, did have cylinder liners. Both were, as you noted, open-deck designs with free-standing cylinder bores.
Later, the notorious Cadillac HT-4100 4.1L v8 of the 80s used cast iron heads on an aluminum block also. The failure of the 4100 really doesn't say anything bad about iron heads on aluminum blocks, per se. The slant-6 had relatively little trouble, although people who build them today for restoration (and occasional racing- the bare block can be hauled around one-handed!) note that it doesn't have a lot of margin for high cylinder pressures and doesn't take well to much boost or any detonation. But the stock ones held up just fine, and there are a surprising number out there still running around (sometimes with the owner completely unaware that its an aluminum engine). But conceptually, it really is a little backwards to build a light aluminum block and then penalize it with a pig of an iron head. If you need iron, it makes more sense to use it in the BLOCK where the extra strength is most needed, and that's why there are so many iron block/aluminum head engines still in production. And looking back to the first poster quoted above, I can't think of ANY iron block/aluminum head engine that proved to be a "fatal combination." I know a lot of people believed it was going to be awful when they first started appearing in the 70s, but in practice it worked just fine with the correct choice of head gasket material to allow for the differential expansion. Heck, my wife's iron block/aluminum head Chrysler 3.5 has 260,000 miles and has never had the heads off (or anything deeper in than the intake plenum gasket, for that matter).
My memory of the Vega's problems pretty much agrees with yours- the main flaw was the lack of rigidity of the block itself, allowing the cylinders to "go egg shaped" with the slightest overheating (or even normal spirited/agressive driving), resulting in huge oil consumption and of course power loss.