8L S3 is not ideal for kids, but it's manageable. It is a problem of getting the baby-seat past the front passenger seat, because the leathers do not allow you to move that seat forward much. My 4-month old daughter seems to be OK with me stuffing the seat, with her in it, into the car. Lack of isofix points is a major issue, so you have to think about getting a b-seat with a base.
I have a lowered S3 with 18" wheels, which is not the best combination for comfort, but she still loves it.
The biggest problem for me is remembering to stay off the fast pedal when she is in the car.
I am giving into the missus complaining and getting a 4-door golf soon as a second car, as it is getting a little silly when you have to deal with tight car parks.