Had a 2007 S3, it's a better car than the R32 IMO (I currently own a Passat R36, so not biased particularly either way). The S3, although still front-biased, has a lot better balance than the R32, which feels quite nose heavy, it's also a little less thirsty and a little faster (although not by much on either count).
In terms of driving experience, the S3 feels faster, as the torque profile is very different, although it has a high boost threshold as the turbo doesn't really come in much below 3k, but when it does you know about it. The R32 is deceptively quick in that it doesn't feel like it's accelerating fast as the torque is just one big wall.
The big thing (if you're looking at 2007 cars and not later S3s, and if it matters to you) is that the R32 is available with the DSG automatic, and the S3 isn't until you get a few more years (think it was 2009 for 2010 model year).
I'd also highly recommend looking at the M3 or even the 130i as alternatives, at least to drive them to discount them. Both are better handling cars and more fun in the dry, but won't cover ground as fast as either the S3 or R32 in damp/wet conditions.