I really fancy one of these. Only thing I find after driving lots of vag turbo stuff they feel really wooly on the performance. I would be concerned that it'd feel slow. My Sti is circa 320bhp and I'd want similar feel, so if assume you're looking at 350+BHP in an s3. By the sounds of it, that's a forged rebuild and big turbo needed. Can't imagine 260bhp in gonna cut the mustard.
What I'd really like is the new RS3 they sound superb and watching some vids online, they certainly pull hard!