Hey IT, thanks very much for your opinion, trust me I do like gauging from those more experienced in the 8's what they would do. If I had 4-5k sitting around I would definately go the 4.2 route (theres also a very tasty looking 2.8 on autotrader with only 45k miles on just now), its something I will do soon.
I've decided though that Im going to give my current motor one last lease of life and go for the replacement engine. The mechanic is going to ensure timing is done and oil is changed. It may sound silly but I've grown rather attached to the car after it taking me and my gf very safely and securely all the way to Pisa in italy last summer and also then rushing her to hosp in labour recently.
I know it does sound like this mechanic isnt particulary competent but all he has done for me barring this has been spot on and he has also owned D2 A8's previously so knows his way around most bits. Just one of those things I guess.
Thanks to all for the advice