You could always look elsewhere....
What about the Mk3 Astra SRi/SXi? What about a Pug 306 XSi? Both are better handling than the Golf mk3 (Probably mk2 also), maybe not as reliable (306) but a much newer car for the money.
I agree with some of the comments above about the Golfs development, the Mk2 looks Ok but sells for more money than its worth IMO. The Mk3 did get lardy compared to the Mk2 and the Mk4 looks terrible and is very heavy. The Mk5, now that is a good looking and great performing car. I think VW did start to lose their way with the 3, got worse with the 4 and got their fingers out with the 5 probably after seeing the success of the Leon Cupra/R.
Its an evolutionary path, the owners were growing up (well, some...), families getting bigger, more and more emissions and safety legislation kicking in (which is a good thing) so the cars had to grow to accomodate these things. The new passat is bigger than a VX Omega, jeez, thats a very big car.
What will happen
when all the decent Mk2's have run out? It won't be that long, they are getting old/thrashed/crashed and pretty soon will be as rare a sight as a Mk1. My guess is it will go one of 2 ways - The Mk3 will be lauded as the greatest as the Mk2 is now and will sell well or loads will jump ship and buy the Leon Ibiza/Cupra.
Does any of the 3 pages above help you, not in the slightest, it tells you why each one of us has bought the car we have. Its your money, your own individual needs/wants to cover and its your choice. All cars will do roughly the same job, pick the one you like, don't be afraid to look elsewhere and buy oneÂÂÂ

If you have the money, why not stick with the blue oval and get a 2.0 Focus?? They will leave the Golfs upto and including the Mk4 for dead on handling (in your price bracket), be cheap to insure, garage in every big town, good safety, modern design, decent performance etc etc.