I dissagree...
If you really take the S3 up a level in engine output, suspension and brakes, you end up with a performance car (still on a K04 though)
For example, my old S3 was making less power but more torque than some Evos and WRX/STIs...it was lapping Knockhill quicker in the hands of the 2nd owner, and able to play on a level playing field out on the road (lots more low down torque + gearing)...it's all swings and roundabouts...you has the edge here, they had the edge there.
Nobody suggests that a decent Evo or STI isn't a performance car...so it shouldn't be a surprise that a well sorted S3 isn't one.
Of course, throw the same money at the Evo/STI and the gap re-opens...that's life.
The point is that with sensible changes (not always cheap, I agree) you can end up with an S3 that had Evo/STI like handling and performance, road or track...but still does the 'great interior' and 'refined car' part better than any Evo or STI ever could.
Sadly though, the chassis of the S3 means that it will always drive like a 'refined car'. That is, it will never feel like a particularly inspiring car to drive...utterly efficient when set up properly...just not inspiring like the Evos are.