I very much doubt its a "clockspring" Dealers are mostly idiots in the country when it comes to these units.
I bet you dont have a VAG-COM or VCDS software do you?
You need these to recode the multifunction steering wheel and sometimes some other stuff too.
It depends on what firmware your going from and to.
The dealers are clueless to this as they have diagnostic units that cant do some of the things you can do with VCDS and they only look for errors. As far as your unit is concerned it doesnt have any faults. It just doesnt know whats connected to it because the unit needs to be recoded. The dealer wont know this unless you told them you tried to upgrade the firmware and look at it in detail.
I went through this with my dealer when I had my 1st service and my sunroof miraculously stopped working.
I went back and forth several times trying to get it fixed and it was eventually diagnosed as a faulty electric sunroof motor after several other parts were replaced. In the process of elimination before they finally realised it was the sunroof motor, during one of the attempted sunroof repairs the dealer pretty much broke my NAV because they for some reason thought it needed to be upgraded to fix the sunroof... Then they couldnt workout how to reactivate all the controls and get the sound working.. Idiots I tell you.. idiots... I had to fix it myself with VAG-COM and VCDS.. Thankfully I have been using this software since 1998 so I know what to look for.
In anycase, you should have done more research before jumping into a FW upgrade. The current guides often dont make the statement up front that sometimes you will have to recode things after an upgrade and you will need access to VAG-COM and VCDS to do it. Only some dealers have the more expensive VAG diagnostic units that can do some of the required recoding. There are a couple of different diagnostic units that different dealers carry and your dealer may not have the ability to fix this even with a factory reset. (which they probably tried)
If you find the clockspring doesnt fix the issue, (sounds like they are taking the piss out of you to me) then I am happy to meet up and diagnose and most likely fix your problem on the spot in 10mins.
PS... I doubt you want them to do this (link below) to your brand new car to repair a faulty "clockspring" to find out it doesnt work. !!!!
Bottom line.. I wouldnt want a dealer digging around like this in a new car after my experience.
How to replace the Steering Wheel Clockspring on a 2006 VW Passat 2.0T (should be the same process on VAG cars)
VW Passat Repair: How to replace the Steering Wheel Clockspring on a 2006 VW Passat 2.0T (Part 1).
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