This is my third VW, and favorite so far.
Regarding a previous poster's comments about the interior being "cheap": What planet do you live on? I will openly admin the cars faults, but the interior is absolutely top notch. The seats are comfortable, the upholstery and plastics are better than anything in this price range except Toyota and it's stylish (unlike Toyota) and not too weird (like Honda Civic). After 60,000 miles, I have no squeaks or rattles and only a slightly worn spot in the carpet from my right heel. You can't find a better interior without spending an extra $20,000.
The engine is amazing. It makes power at any speed and gets great gas mileage. Yes, you can find more powerfull engines and more efficient ones, but I don't think there is any other engine on the market that pulls off both this well.
The transmission (manual) is OK, at best. The synchronizers are not up to the task if you shift really quick and the shifter feels like it's connected to the transmission with rubber bands.
The suspension: VW's engineers did a really good job of tuning a bad design. The McP struts in the front are a poor design (although inexpensive) for a car that's "performance oriented". and the torsion beam in the back only belongs on a minivan. Despite that, it handles amazingly well, but it's no S2000...if VW would shave a few hundred pounds and give us a multilink suspension at both ends, the car would be perfect.
I've had 3 minor problems in 60,000 miles. Only 1 of them impacted the drivability of the car, and that one was diagnosed (coilpacks are a very well documented problem) and fixed in 10 min. My previous car was a 20002 VW TDI... I put over 300,000 miles on it and it never once failed to run. Long term use of cheap (87 octane) gas or cheap (non synthetic) oil will cause problems for this engine... the 2.0 engine doesn't have those problems, but it's not nearly as much fun either. VW's (European cars in general) are extremely durable, but not so much reliable... you can buy a Honda or Toyota and drive it for 5 years and probably never go to the dealership, but they basically self destruct at 120,000 miles or so. European cars WILL require an annual trip to the dealership (probably for some crappy electrical problem), but they run forever.
I've heard of major problems with the automatic transmissions, but hey... if you don't want to shift the gears yourself, why did you buy a VW... go get a boring Toyota.
VW's dealerships (service departments in particular) have a bad reputation (as if there are any good ones). It's probably mostly deserved... but there are good ones out there too.
In GTI trim, it's not the cheapest car to actually own... the tires are pricey, it requires synthetic oil and expensive gas. The 2.0 gets the same mileage, but will run on the 87octane stuff, uses cheap oil and sits on much less expensive tires... it you don't mind giving up the engine...