Current S4 owner, and I test drove the S3 today.... My thoughts:

[drew4392]

Overall impression: pretty nice.

Exterior: I liked the size, and thought it was reminiscent of the B5 S4. Lines are sharper, and I think it looks more aggressive than the S4.

Interior: My biggest concern was quality of materials, but everything seemed nice. Maybe even on par with the S4. Smaller, but not in a bad way. Rear seats seemed to offer a similar amount of room compared to my S4. Maybe the seats are smaller? Styling, ergonomics are a little bland. Not much going on, and I think it detracts from the impression.

Engine/Power: Pleasantly surprised. It packs a punch. It reminds me of an Evo or a 2-stroke dirt bike. Dirt bike analogy is a little exaggerated, but it likes to be wound up. Powerband isn't as smooth or linear as the S4 (obviously). From a dig or even a mid range sprint proved impressive. A tune must wake it up nicely.

Transmission: Wasn't overly impressed. Hoping to hear from others, in case it was just me. Is the S3 tranny a dual clutch?? It seemed sluggish on upshifts. Downshifts were quicker than the S4, though. Overall, it wasn't crisp. A tuned S4 TCU gets it close to the PDK, imo. I didn't feel the S3's tranny was as capable.

Suspension: MUCH better electronic damping vs. the B8 electronic damping. Dynamic setting makes things nice and firm. Chassis seems well-balanced, and the weight difference really comes through. Much more nimble. The S4 through the twisties feels planted like a sequoia tree. Big, heavy, but great footing. S3 seemed more nimble, but maybe not quite as planted. Might have to do with the haldex system and different rear diff. Solid, overall.

I liked it. Considering switching from the S4. The interior is a little plain for me. Driving experience is enjoyable. I think it is better than what I was expecting, but wasn't overly exciting. Probably because it was very similar to my S4. A good thing, perhaps.

[will13k7]

That's a fair review, but the DSG shift speed is about the same on both from what I can tell. It sounds like you're coming from a TCU tuned S4, maybe that's skewing your impression a little? The S4's DSG does feel more raw though, while the S3's feels more refined IMO. plusses and minuses for both though.

[RyanS3]

that was a spot on review
if the trunk is big enough for you, it's a great car
sequoia tree thing is the biggest issue with the S4

tune the S3, ecu and tcu, and you'll be quite happy

[Spartan300]

Having switched from a S4 to the S3 last month I can say that I agree with the op observations. I don't feel there is as much of difference between the transmissions, slightly different yes but not night and day different. One difference I do feel though is the wheelbase difference over uneven roads make the ride a little more lively. I will need to wait for the summer to give it a proper assessment especially if I get to take it on the track for a few laps.