This Hesitation problem is a common one, I have it badly on my AAM engine and cant get to the bottom of it, i find the more i drive it the better it gets, How ever saying that i did tweek my timing the other day and it really sprung to life! I think there are a few sensors in the Injection unit that tend to fail and cause this problem, I dont know about you but i find it runs very rich with it too. Ideally get it on VAG-COM, Mine came up with one fault which could be related.. Never fixed that though.
Exhaust could be leaking from the maifold if it sounds that noisy, worth getting it up on a ramp to see where its coming from, the 1.8L engines usualy run nice and quiet