RXBG,
While I am sure that much of what you say holds true for the USA, the same has never been true in Europe, with the 3.0 litre diesel engine in the Mercedes-Benz S-Class, for example, making it this model's best selling engine. Moreover, given an increasing environmental consciousness in Europe, we are seeing car manufacturers reduce the capacities of all engines in all classes. I note that the latest Lexus RX is only available as a hybrid in the UK and the next AMG generation of fast Mercedes saloons is returning to turbocharged 5.5 litre V8s.
Secondly, Audi's brand defining market is Europe not the USA, where sales are still some way behind other imported luxury brands. That means it will be driven by what customers demand here. The joker in the pack, of course, is the burgeoning demand in Eastern Europe, where oligarchs don't give a s**t about the environment and will take anything luxury manufacturer throws at them so long as it packs a V-12 or V-10 with 500 bhp plus. With China and the Former-Soviet Union growing faster than other markets what Brits, Germans, and Frenchman want may no longer be relevant. in which case, new money will drive such cars but only until they see that old money has invested elsewhere. When you alienate your core market, it can be a form of commercial suicide, although i don't think Audi is yet at that point!!!!
I am trying to look behind the launch of the A8 to see what strategy is emerging and on the engine side of the equation it doesn't make sense. Or, rather it does, if you count Porsche. I think Audi has been told to be careful about undermining Porsche's recently launched, butt-ugly Panamera. This is getting V6 engines next year too. So we get not much more than an incremental advance in economy and power. I wanted Audi to leap forward not crawl.
I don't know if Audi is being hamstrung by Porsche, but if it is, then this is exactly what a lot of us on RS6.com said would happen if the merger went ahead.
I suspect that the S8 may well include the much anticipated 4.0 litre TFSI engine, whatever V-10s have been a dead end since Formula 1 discarded them several seasons ago.