The TT has the best control arms and spindles of any of the MK4 chassis -- the spindles are setup so that the control arm is pointed downwards, giving some actual camber gain during compression (unlike non R32 VW Mk4 vehicles, where the arm starts parallel to the ground at stock ride height, and everything just gets worse from there). The control arms are cast, not stamped steel, and weigh ~5 lbs more than the VW version (according to some spots on the internet, in other spots they're lighter because they're off an Audi); however, they are also stronger and the ball joint holes are slotted allowing 1.5 deg of camber adjustment. You also get the second largest sized brakes on any factory Mk4 IIRC -- lots of information abounds on what swaps with what in this department. Contributing to the limited geometry of the Mk4 platform are the strut mounts -- they're not adjustable, and there aren't any bolts or studs to attach a camber plate to. Instead, there's basically a rubber donut and a retaining cap, and when the load is on the strut, the ruber donut gets compressed. There are also a bearing in each one, with the bottom of the strut being clamped into the knuckle. Plan on replacing the strut mounts and bearings, because the stock mounts are too soft even when new, and the bearings are too cheap not to.
The 1.8T should be able to take ~300hp before rods begin to desire to up and leave their homes for greener pastures, that was the limit for those playing with longitudinal setups. K04 turbos are bolt on, and shouldn't be too expensive new, especially from aftermarket places. The ECU is a Bosch ME setup which has been fully cracked (so you can tune it with a laptop and an eBay cable), and the K04 is common enough there are off the shelf tunes available. Also, RusEFI has an ECU board project that is designed to fit into that case if you wanted to go standalone. IIRC, the 02 sensors are a wideband Bosch unit, so you may be able to DIY a controller to get readings saving $100 or so.
The earlier 1.8Ts did have some issues with oil sludging early on, and there are TSBs + a "sludge kit" that dealers would install -- running full synthetic (meeting the VW/Audi specs) with proper oil changes seemed to cure it on the ones I have had. Being a VW / Audi engine, there is of course a timing belt which runs the water pump, make sure this is up to date / in good shape because there are a lot of valves waiting to get bent.
The variable valve timing tech works off of an oil driven adjustable tensioner in the back of the head: there's a solenoid which controls oil pressure into a piston which moves which side of the sprockets the slack in the chain is on, thus changing the relative timing between the cams (and improving spool / low end torque). Being that there are tiny passages and plastic chain guides on a German engine, I think you know where this is going: They have a tendency to fail at higher mileages, especially if the oil changes have not been religious.
Mods wise, stiffer strut mounts are probably one of the best bang for buck mods (<$100). A lot of aftermarket suspension options are focused on going low, but because fo the geometry it's very easy to go too low and move away from the good part of the camber curve while dropping the roll center through the ground. Ideally, avoiding lowering while stiffening spring rates is the way to go. Also look into the recalls / production changes that were made in late '99-'00: There were a couple publicized fatal crashes that resulted in Audi retuning the suspension to be much more safe and understeer heavy.
If you want power you may be able to squeeze some more out with a tune, but you'll need a bigger turbo for any serious gains since they are designed for low end torque. The side mount intercooler is also pretty small, chunkier side mounts are available on eBay for alarmingly low prices last I looked. The VR6 clutch setup will hold 300lb-ft and is available with a new single mass flywheel for $300 -- this looks to be basically the same clutch I run on my tuned ALH TDI.
. I even let her borrow the challenge s10 which we put on cinder blocks with no wheels in the grass.
