Yes, I would go with the Captain here as well, I do not think the S3 totally outhandles the 172 at all, although I have never driven an S3. The 172 is to all intents a fine handling car, and probably more nimble than the heavier and 4wd S3.
The only thing with 4wd is that you can put power down midcorner, and this of course means earlier take off, if you have both been cruising into, say a right hand bend roundabout.
But as far as handling goes, I do not agree.
The Audi is somewhat faster in a straight line, and has better traction in the wet, but thats about it.
I monstered past a 230bhp S3 at Donington in my standard Integra, there was nothing in it on the straights, and with due respect there was nothing in it on the corners either, but the teg was just that bit faster.