On my ED30, the light stays on, but it still flickers when a front wheel slips. I can still feel the ECU cutting power regardless, so it's never fully off. The level of ignition retard when the unloaded wheel slips is excessive imo. I think these cars would benefit enormously from a wavetrac or Quaife diff.
Also bear in mind that ESP (Electronic Stability Program) is separate to TC cannot be turned off at all. But that's not a bad thing. It saved my arse a couple of winters ago!
TC/EDL (Electronic Diff Lock) is supposed to work up to about 40mph on the MK5, iirc, but it's one of the most ineffective traction systems I've ever experienced!!
The MK6's XDS ABS unit bolts in and works up to 60mph, and is a lot more effective......if you're looking for ways to improve traction.