I had a problem setting up an Audi 200q20v (3B engine) with VEMS yesterday. While cranking the car showed no rpm in megatune. My first diagnostic step was to jumper the hall sensor in the distributor (shorting pin 2 and 3 gives a 50% chance that the car will start, and would rule out the reference pin on the flywheel being out-of-window with the hall sensor).
When that didn't work my next step was to pull the reference sensors on the bell housing. I then bumped the starter over until I could see the pin through the hole where the sensors used to be. Sure enough, the reference pin was too short!! In this case the car had an aluminum flywheel which in and of itself isn't a problem, but for whatever reason they designed this flywheel with a very small pin. I tried to get a picture but didn't have a good camera with me. I'll try again when we go to pull the starter so we can replace the pin.
Here is a scope trace of the reference pin with his car running at idle on the stock ECU. He noted that in the summer time the car often dies randomly and I suspect this is the reason. Only about 4v peak to peak @ 1000rpm:
vs a healthy trigger on my car, about 20v peak to peak:
(the noise on the bottom trace is from having the 2nd probe resting on the valve cover. the signal is channel1).