I have this kit. There are some installation threads with pics over at VWVortex. I was disappointed that the kit knocks out the satellite capability. It plugs into the only available plug in the back of the stock headunit, and that's where the sat plugs as well. I understand there's some sort of pass-through connector that can be had, and I guess I'm going to have to get that.
On my previous gti, I had an aftermarket HU and had RCA plugs connected to the Aux In at the back of the unit. Here's a pic:
This had no distortion and the sound was great. The only probably was that it didn't charge, but I bought a charger and could hook up that way, only that meant a conglomeration of cords.