S1 Aeros are particularly noisy when cold and manoeuvring. This is in part because the rack, I believe, is solid mounted with no bushes! Mine actually frightens people when cold and manoeuvred!
Obviously not easy to diagnose from your description but the noise may be "normal". Equally if you still have the original hydraulic pump it could be on it's way out, though don't know the noise it makes when it is close to failure. It is possible to test the pump for play by reaching down to the pulley driven from the steering pump gears. If you have more than 1/2 inch of circumferential play then failure is not far off.
Diagnosis on stalling issue sounds good. Good also be crankshaft sensor. I've had both fail on my car.
So disappointing yes I can imagine, but nothing really to worry about especially given that you bought car from a good reputable dealer.
