UPDATE
So I spoke to the Service manager this morning.
I've actualy done 2,175 km since they topped it up and he confirms the oil light comes on when the dipstick minimum is reached (which it had when I took it back 2,175 km later). He says the top mark to the bottom mark of the dipstick is 0.9 litre so I'm not far off the handbook guidance of 0.5 litre per 1,000 km. He says he sees some boy racers use that pretty quickly and others (like me he says ...cheek :-) who "pootle around but occasionaly put our foot down on the motorway" use hardly any oil in the GTI. He's going to get on to VW and come back to me in a few days. I asked about compression tests and why the service girl had said about the new engine but he didnt comment (not surprisingly since he wouldnt have had the facts in front of him in fairness). His reaction seemed to imply its fairly normal and wouldnt be concerned.
What other questions should I be asking when he calls back?
A mechanic I know of is saying its likely to be the Turbo picking up oil from the sump and a trubo fault
Someone else is saying repalcing the piston rings isnt a huge job anyway
Compared to a new engine (and the costs), why shouldnt I just implement a strcit regime of topping it up with oil once a week? I know oil isnt cheap but its gotta be less than changing the engine? or am I missing some other issue like it failing an emissions test or further deteriorating in the future.
What about using "Restore engine restorer" additive?
Help - I know very little about car mechanics.....just love driving the car!