1. This is a known problem with the D2 dash, and suffered the same fault myself. From what others have said, the issue is caused by heat, hence why it gets worse the longer you drive. One of the companies that fix them is
http://www.bba-reman.com/gb/index.aspx, though I don't have any experience of them. Forum user Ameiseuk has photos of the dash dismantled in his album
http://forum.a8parts.co.uk/album.php?albumid=118. You could always send him a PM to see how he got on with it. If you opt to have another unit fitted, it will have to be done by a dealer, so they can code in your keys to it.
2. By coincidence, I've had this these last couple of months, but I knew the pads were worn. I replaced them with new Bosch ones, but still have the pad warning. I know it's not a MOT failure but it is a pain. I had thought about trying to trace the wiring from the sensors, but haven't investigated it any further.
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2001 A8 D2 FL 3.7 Q - LPG Conversion, Engine: AKC, Gearbox:FBB, Colour:LY5X Aqua Blue pearl effect, Interior:WJ light beige/dark beige valcona leather with burr walnut inserts
My DIY jobs -
Replaced alarm horn,
Replaced Coolant Temp sensor,
Updated RNS-D firmware,
Installed Reversing Camera and Digital TV,
Dashcam Installation,
Retrofitted Rear Blinds,
Auto-Dimming Rear View Mirror,
Chrome Boot Struts
Sold! 
2008 S8 D3 5.2 V10 - Engine: BSM, Gearbox:KLW, Colour:LY7F Suzuka Grey Pearl Effect, Interior:Black/Black with Silver/Black valcona leather with carbon atlas inserts, Bang & Olufsen, Heated windscreen, Soft-close doors, TV, DAB, AMI, Quad Zone, Auto Boot, Auto dim Mirrors, Keyless entry, PDC with rearview camera, AFS II Headlights
My DIY jobs -
Fan Jet Windscreen Washers,
Retrofitted Electric Side Blinds