Sounds as if there is an (unusual) problem with the release fork. Which means removing the box (or engine). Earlier boxes, and I'm not sure if it applies to the S3, removing the bracket that holds the gearshift reveals an opening into the clutch housing, through which you may be able to see what is going on.
This sort of mechanical fialure is unusual - most such failures, as you probably realise, are in the hydraulics, so you need to ensure that the free play on the pushrod at the slave is not the normal movement. As a further check, ensure that the slave cylinder piston does move when you push the pedal down. I would suspect (unless you have already checked this) either the nuts have come loose on the master cylinder pushrod, or the trunnion has worn through.
John


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