Gearbox will be fine. Unless you're looking at buying a car which already has some mods, ie: brakes/coilovers/exhaust or a high miler, I think you might struggle to get 500bhp out of £16k.
There's a guy on here (ZeroK66) who's spent over £30k on his S4. It's imola yellow, running over 500bhp and has 475lb-ft torque. He's mentioned that he'd let his go for around £18k, and it's only got about 50k miles on it so it's a ****** bargain! Might be worth dropping him a PM.
Here's his 0-140 run on the Top Gear airstrip -
http://www.youtube.com/watch?v=W0rqgajcXAA
And here's his spec (pulled off the comments from his 0-160 run on youtube):
Stage3+
Ported,polished+clearanced K04s
Cust tubular exhaust manifolds ceramic coated
Custom intake pipes in 2.5" diameter, tapering to slide fit on compressor inlets
Custom compression dropping Headgaskets from (8.2:1 CR)
2001.5 intake manifold (no mods)
APR Bi-pipe
RS4 MAF and Y-pipe
Custom 3" downpipes + dual 2.75" exhaust
Bosch motorsport 044 special 10 Bar fuel pump
728cc/min injectors at 4 Bar rail pressure
FMIC and custom IC piping
Custom Remap
RS6 EGT Sensors
And that's not mentioning his Bilstein PSS9 coilovers, H&R Arbs, RS6 Brakesm, 19" BBS rims, etc.