Agree RR - I perceive the Audi to be better built and a step up from VW. I have owned several of each brand and also consider the Audi to be a more mature car, with the ownership experience indicating a step-up in class.
Having gone that route over recent years though (Audi A4 T Sport, Audi TT, Porsche Boxster), I have found myself returning to the GTI, which I consider to be the best all round affordable car for my needs. I have not seriously gone down the modding route for many years now, instead choosing to put my own cash into upgrading my car to a better model. As we all know, mods, like optional extras are rarely recouped come resale and that's the reason I'm now sticking with my beloved GTI.
I do not personally like the looks of the A3 as a model and feel that it looks too heavy from all angles, particularly the rear 3/4's. I agree it does look better with slightly lower suspension and larger wheels/tyres, but I ain't a big fan. As stated, it is better built and the driving dynamics of the quattro 4WD system are good but you do lose some of the fun of driving a FWD car.
The Mk V GTI is also a mature car IMHO, and given that it has now been around since 2005 and is due to be replaced by the Mk VI next year, it is now affordable to a much larger market and younger ownership, who naturally want to buy it and mod it.
If I was going to change the GTI for an Audi, it would only be for something like an RS4 which has much more visual impact and is a proper tool, but the price differential could be too much for many.
Just my two-penneth

Cass