Nope, it's a carryover engine from the Mk 3, and not really much of an improvement of the old 1.8L my Dad had in his '88 Jetta. It worked OK in that car, but the Mk 2 Jetta is a much lighter car than the Mk 4 cars, so Mk 4 VWs with the 2.0 (115HP) are dogs.
Actually, the history of VW's 1.8L goes back into the early '80s. I had one in my '84 Scirocco and a buddy had the same in his '83. Back then, it put out 90HP, which was a great-for-its-day 100HP per liter. I still miss that car as that engine was a nice stroker (good torque).
In any event, I nearly bought a GTI in 2002. At that point in time, the motor choices were the VR6 or the 1.8T (turbo). I don't recall if it was VAG's "old" 1.8T (which my wife has in her 2000 Audi A4), which was around 180HP and ran on 87 octane (regular), or the "new" 1.8T which had a few more ponies (200HP?) but required 91 (super). In test-driving it..and having lived with my wife's car for the past 8 years...I found the output level of the 1.8T to be fine.
There are two cautionary notes -
#1 is that in this time period, VAG had a "sludging" issue. If I recall correctly, the simple bottom line is that the cars should have been run on pure synthetic motor oil, as the non-synthetic stuff was breaking down and sludging from the heat, which could cause a blockage and motor misery. I know that Audi had a warranty extension; don't know if VW did or not.
#2 is that the 1.8T was very easy to do 'chip' mods on. While its nice to have a bit more power, I'd probably pass on a used car that had one done by a prior owner, because its a reasonable indicator that the car got flogged, which invariably shortens its life. If nothing else, use this as a negotiating point to haggle and try to get another $500 off the asking price of the car.
All cautions and caveats aside, I'd personally get the VW. I had 11 years of good experience with my Scirocco, and while VW did have electronic gremblins in later model years, I believe that they've sorted out a lot of their problems, and I enjoy the teutonic setup of vehicles. That, plus there's my general concern that the Subaru with its rear wing is more likely a police ticket magnet, and a couple of years of newer model year fits into the 'buy the newest you can afford' paradigm for getting a reliable car.
-hh