1998 = mk 3
1999= mk3 (i dunno much bout mk3 changes...)
1999.5 = mk 4 (new, current body style)
t3/t4 are commonly used to upgrade the turbo. you'd have to get an upgraded chip like you said. some notable cookie-cut chips (non-custom made for your car) are the revo chip with BT software as well as the APR stage III (since the stage 3 kit has a t3/t4 turbo included)
OR you can go to upsolute and get a custom chip banged out for you (you just need a dyno chart + air/fuel ratio, and a mod list).
but then again, this information holds true for mk4s... i hope its true for mk3s too.
vw's are capable of 30 psi... but not for long. 25 is usually the threshold before things start breaking down (even if you bulk up the internals). some dude on the vortex had a 42 psi 1.8t ... till it blew after 40,000 miles
sorry for the long post, seems like all mine get like this... moving on to your next question:
aggressive driving + mountain roades = poopy mileage.
if you want good mileage, you'll have to drive at a consistent speed. if you want fun, you'll sacrifice mileage (atleast on that tank of gas)