The GTI rims (Denvers) will definitely fit your car. Because your car likely rides higher than the GTI, it's almost certain that you won't get tire scrub (there's no flared guards on the GTI that I'm aware of, and the inside of the wheel arch is the same across all Mk5 Golf models - on Mk5 Jettas too for that matter).
I'd not choose Continental tyres myself, as I don't think they're good value for money here in Australia. That said, I probably wouldn't choose Toyo either. I like the Bridgestone Adrenalins (they're not as sporty as Bridgestone's advertising would have you believe, but they are a good tyre for the price), and there's a few people I know who have been happy with Kumho KU31s (especially for the price). I've liked Pirellis in the past (and have a seemingly nice set of Dragons on the car at present), but I don't think they offer the quality or value for money they used to.
When you go from 16" wheels to 17" wheels, you will lose a little compliance due to the shorter tyre sidewall (the sidewall absorbs some bumps before they get to your suspension - in general, the shorter the sidewall, the stiffer it is and the more movement it transfers to the wheel and thus your suspension and ultimately your car. That said, 16" to 17" really isn't a big difference - you're only losing 1.252cm of sidewall height if you keep the rolling diameter the same (as you'll try to do, as you have to do by law).
The 17" wheels are probably a little wider than the stock 16" wheels on your car too (I'd guess the 16" wheels are 6.5" wide, and the 17" wheels are 7" or even 7.5" wide) - which means you'll probably end up with slightly wider tyres -this is generally (but not always) a good thing.
One thing to be careful of is the speed rating of the tyres. On my Mk4 Bora V6 4Motionf, the factory specification is for W rated tyres - in NSW at least, you're not allowed to go to a lower speed rated tyre without putting a sticker on your car windscreen stating that you have (and then you're only allowed to drop one speed rating I believe). This means that without a stupid sticker, I need to stick with W rated tyres - and not all manufacturers actually produce them. You'll want to check what VW recommend for your car (it will be on the tyre placard), and stick with at least that rating.
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