Ok, to clear this up. The advanced telephone prep gives you an induction plate in the centre arm rest, where you are expected to put your mobile phone in order for it to connect to the external aerial. There is no physical connection for the phone to the aerial, however there is a 5V USB port which is for charging ONLY. Manual states for the optimum connection the phone should be put inside the netted holder in the armrest and that no other metal objects should be put in there. Storage useful for nothing else then!
Secondly, as I have found out, in the centre storage locker under the radio, there is no longer an MDI port, all you get is an AUX jack and another USB port. This is connected to the radio, however looking at the manual is only for connecting up an external hard drive. ie similar to the SD Card slot, you can have your music stored on a USB key or external drive.
Yes, when you are using streamed audio via bluetooth the next/back controls on the steering wheel do work so does the track information, however you can not browse the source for music, all you can do is go back and forth with the tracks. Also, yes, the iphone 5 works absolutely fine with the radio over bluetooth. So making/receiving calls, checking address book and scrolling through missed/dialled calls all works fine.
I did notice that when I was driving with my mobile in the armrest the signal indicator on the radio was significantly better. However the real test will be tomorrow night when I am on the phone to the missus on the way home from work, and to see if I drop calls in all the normal places!! Here's hoping the advanced telephone prep was actually worth it.

However, as stated before, I am shocked they have pulled the MDI port from the vehicle due to the telephone prep, and I will be making a complaint to both my sales rep and to VW regarding this.