Regarding the misfire, it was hitting all cylinders a bit, but #4 a lot, and #5 a decent amount. For example, when actively watching the misfire counter it would look approximately like this:

#1 - 5
#2 - 3
#3 - 3
#4 - 35
#5 - 25
#6 - 7
#7 - 2
#8 - 1

(all rough examples, but the general ratios are correct)

The misfire counter seems to automatically reset to zero every 30 seconds or so, and if we revved the motor to around 3000rpm and let the counters reset, they would stay at zero until we let the rpm drop. Engine seemed to be running fine at the higher rpm and power seems normal.

It's a weird pattern which doesn't seem to point clearly to a specific component failure. I've seen coil packs fail in groups, but not 8 at a time!

Also noteworthy was there were no other codes in VAG COM. I also recall that ignition timing seemed to moving around a lot when we watched it at idle. I need to scan my car and see what the timing does there to get an idea of "normal".