Short version
I don't believe it is the Dynaudio setup itself that is the problem, it is the pre-processing in some fashion.
In my experience, playing mp3 from an SD card is bad - boomy bass, muddy middle and treble is lost, and the equaliser is far too limited.
Playing via bluetooth is OK (and good if you use the phone equaliser to adjust a bit) and DAB is good.
There are plenty of other bugs in the system - ranging from volume management to crashing and not displaying lists of albums etc. from bluetooth devices.
It would be interesting to know which sound sources people are, and whether they think it is good or poor.
Long Version
I was bitterly disappointed with the Dynaudio setup in my MK7 Golf R, until I discovered what was wrong with it. I did the obvious, dumped my music to an SD card and tried it. But it sounded far worse than my 9 year old Mondeo Titanium X (with the same mp3 files). Yes, it pumped out more volume, but the mid range was just a mushy mess. The bass was far too overpowering and uncontrolled and as the equaliser is pretty much useless (only 3 sliders) you cannot adjust it without making a mess elsewhere in the spectrum.
I listen to a lot of rock music (Pink Floyd, Queen etc) and wondered if it was my oldish mp3s (though they sound fabulous normally). So I re-ripped, used Amazon mp3s, you name it - the Dynaudio setup was just poor no matter which mp3s.
In the end I gave up and switched to using music from my phone via Bluetooth, and using an equaliser in the phone, to get a half decent sound, while leaving the Dynaudio settings on Authentic, no adjustment, and the sub slightly turned down. However, I noticed that even without using the equaliser in the phone, the quality was much better. This is for the same mp3 files. So I wonder if there is a problem with how they have set up the mp3 decoder they use for playing from the SD card?
It appears that a mixture of poor mp3 decoding and a useless graphic equaliser mean you simply cannot use the SD card facility effectively. I tried the settings Taw1a suggested, and from the SD card, they were better than the standard, but it was still poor.
Other Issues
Changing focus of sound immediately halves the volume for some arbitrary reason. However if you turn the unit off and on again, it retains the new focus and comes back to the proper volume. If you don't do that, the progress bar for the volume is wrong, and when it gets to full volume, you are at about half volume - keep turning it up and it gets louder even though the bar says it is at max.
Another issue is the dreadful user interface. At least in my car, the SD card is not really usable because of sound quality, so I can either use my phone to control your music, which is clearly not practical while driving, or you are reliant on the bluetooth interface. Well, with android and Google Play Music you can get a sort of usable system - you get a list of albums, artists, songs and playlists. But it simply breaks all the time. At one point I had it listing all my albums, but then it lost most of them, and started instead showing tracks from the first album. Then it started simply not showing them at all. Remove the phone and re-add, and it breaks in another way (it showed Albums, Artists, Playlists, All Songs, album 1, album 2 etc - all in one long list). Maybe its a Google issue, maybe a VW issue - its unusable either way.
And there are other problems - poor interface, unusable touch screen while driving (why such tiny icons right at the edge of the screen, which does not respond correctly at the edges), why no next / previous album on the steering wheel (but two ways to go next and previous track ffs). Navigating a hierarchy of music is a simple issue - you need to go up down the hierarchy, and then up down a list of options. The interface, to my mind, is dangerous - the combination of fiddly interface and having to use a centre console display to change album is simply unusable in a safe fashion while driving, unlike e.g. the system in my old Mondeo which uses the centre display to let you change albums etc.
All in all, thoroughly frustrating audio, and spoiling a fabulous car.