I would say be vary wary! The dealer is obviously VW/Audi savvy being that all bar 1 of his/their stock is VW derived. I'd think that they have a fair idea of what's wrong and know it's going to be expensive to fix.... And remember you'll have no comeback as they've stated the car has a 'problem'.
If it's a BKD engine (and it probably is) be advised that the 'early' models head's are renown to go porous - there are 3 versions and the first 2 could prove... shall we say.... troublesome (ie, junk!)..... If you go for a looksee then at the very least check the water for clarity with no 'mayo' in it or under the oil filler cap and try to see if there is white smoke from the exhaust, trouble is (As Rhyso says) it 'could' just be the EGR valve and that could well show the same signs as a porous head (mayo/cloudy water/white smoke). No real way of checking porousity for sure without removing it and having it pressure tested properly!
Or.... It could just be both of the brake lights blown!!! (but we all know it isn't eh?)
