Not an uncommon problem. In some AP Racing kits it's actually in the fitting instructions to shave your balls. There's enough meat on them to get away with it. I ran with shaved balls for about 6 years with no probs.
S3 arms are identical in length to GTI ones. There isn't a lot you can do with what you've got, other than ball shaving. You could alter the disc offset with custom bells to push them away from the balls, but that will obviously affect the caliper alignment as well.
I can see why this experience has pissed you off, but it's a common problem. Just a shame the seller was vague (deliberately?) about it.