I have had a few different volkswagons in my life, my current one is past 150k (2003) and the true problems are small but annoying. Dealer service varies widely between great and personal to impersonal and downright rude. The cars are generally good quality, there are niggling issues (squeeky bushings, phantom check engine lights, rapidly burning bulbs), but overall the satisfaction rate is high.
Last time I did montreal to Toronto in my car, I got right about 7 litres per 100 kms (which is about 34mpg US) (it's a 1.8T). A similar year TDI might get a closer to 50MPG on the highway, but the price of diesel fuel right now doesn't make it that much of an advantage.
Overall, I would recommend, especially the current Jetta City or Golf City, an absolute deal.