Different differentials?
 

I've got a S5 Turbo II with the viscous LSD. I use it for HPDE and will probably starting doing NASA Time Trials with it to get extra track time, and because it looks like fun. Current state of the car is a street port, lightened flywheel, microtech ECU, Apexi N1 super noisemaker exhaust, K2RD suspension, RB front swaybar, roll bar, seat and harness. Makes about 213 at the wheels at only 8lbs boost, with no boost controller, just a vacuum line run straight to the WG actuator.

Anyway, I'm going to have the underside and rear end all apart to refurbish the rear suspension and rebuild the transmission, so I'm wondering about the differential. Is there any benefit to keeping my stock fluid LSD vs going to the S4 clutch type or one of the aftermarket clutch type such as the KAAZ? There is room for lots more power on my motor pending a better turbocharger and intercooler, and I will probably be going that route in the future.

I personally have a FD diff in my S5 tII and I think it works wonderfully. Absolutely no noise, always engages when it's needed and never ...ever ...ever clunks. You can't do dynamic drifting with it, but I don't think that you plan on doing that.

What type is the FD diff? Torsen?

yep that's the one.

What's involved? Just take the core out and bolt it to the stock ring gear? Or do you need the FD inside CV ends too?

Is there anything inherently wrong with the stock viscous diff? It seems to work fine. The "clunk" is usually a broken front diff mount, not something wrong with the guts.

Some people might tell you that since there's no direct contact between surfaces like in a clutch type, a viscous won't wear out. That's not true, the special fluid will break down over time and become ineffectual.

Basically you've got 3 options, the FD torsen, which will be a very good choice for track use, especially if you don't have huge power, the S4 clutch type, which will need rebuilding and will be more than sufficient for lots of power, or an aftermarket diff. The clutch types aren't linear in their lockup characteristics and will cause more understeer than the torsen will, as that's more or less seamless. If you lift a wheel the torsen can't handle it though, and you'll spin the unloaded wheel.

I'd say get an FD torsen, it's probably the best bet, and they never wear out like a clutch type or viscous one will.