My first annual service (July 2010) cost me under £100! £95 if I remember rightly. I don't expect the second one in July 2011 (which will presumably be a major one) to be more than £250.
And if I go to an independent VW specialist it'll be cheaper still.
I always ring round and ask the main dealer to match the best prices I've obtained elsewhere. I did this last week for the wife's Saab. It's coming up to its 4th annual service so needs a major one. I rang a couple of independent Saab specialists then rang the Saab main dealer we bought it off and who've serviced it ever since. Surprise, surprise but when I say I'll come to them if they match the independents they price match.
So I get a decent deal, get the car serviced by a Saab main dealer and they get some business too. Everyone's happy.
Surely even VW dealers aren't so stupid as to not want to do this?