When you press the ASR/ESP button it deactivates the traction control. A light in the cluster will illuminate that has a triangle with an ! in the middle and an arrow wrapping around it. This is when the fun starts
All of these problems should be brought up to your dealer. Warranties are fun to have and I'd definitely let them know what concerns you are having.
As far as modding, there is a thread at the top of the MKIV section here started by me. I go over the basics in a very vague way. The first thing I'd recommend would be a boost gauge only because it's a very essential part of a turbo'd car. I'm not sure why VW never incorporated a factory boost gauge into the cluster. The next would be a performance chip. You'll see the biggest gains for $500. It will totally change the car.