did you set the ign to 6 degrees @ 2200rpm with the blue temp sender disconnected and the oil temp at 80degrees+? If not that will probably be why its pinking 
If you did, then I'd replace the blue temp sender 1st with a new one from VW as this affects the ECUs calculations for fueling and ign advance, and then try a new knock sensor. Make sure you do it up to exactly the right torque otherwise either it wont work, or will be broken!
While you're checking the timing, double check the static timing is correct, and also double check the flywheel timing mark is actually marked at 6 degrees BTDC! The haynes tells you how far the mark should be away from the TDC mark, check under 'replacing the flywheel'.
Have a read through my digifant tuning guide as well.
We defo did it with the oil temp above 80deg and with the blue temp sender off. I think its got to be the blue temp sender along with a bit of carbon on the valves.
This is going to get sorted this weekend though, going to give her a top end rebuild because the head gasket blew today! she's like a steam engine!
Thanks for the response peeps, i'll let you know how i get on!
