I have a 2004 A4 1.8 petrol turbo and it's OK for power. The new model has the same sort of engine and power range. I'd say the 1.6 is way underpowered. The 1.9 diesel has a better resale value and has good torque though it will cost a fair bit more even for a 2005 model. The engine is used in loads of VW cars (Seat, Skoda, Audi, VW) and is considered one of the best diesel engines around.
The A4 is a good drivers car. If you do not like or are not that interested in driving then but something else (a Skoda 1.9 diesel).
The boot space is ok. I have no idea what my mpg is but it's no worse than the VW Passat I drove before and I don't have to put up with the mine numbingly boring drive of the Passat.