Extended Toda lattice hierarchy, extended two-matrix model and c=1 string theory

We show how the two--matrix model and Toda lattice hierarchy presented in a previous paper can be solved exactly: we obtain compact formulas for correlators of pure tachyonic states at every genus. We then extend the model to incorporate a set of discrete states organized in finite dimensional $sl_2$ representations. We solve also this extended model and find the correlators of the discrete states by means of the $W$ constraints and the flow equations. Our results coincide with the ones existing in the literature in those cases in which particular correlators have been explicitly calculated. We conclude that the extented two--matrix model is a realization of the discrete states of $c=1$ string theory.