Oli, those comparisons aren't really true.
I would pick S3 over Focus RS any day. Fords are cheaply made and their interiors are far behind from German rivals. Also not everyone likes the crazy looks of RS, while S3 is more or less sublime. There are more ups and downs, but overall I would surely take S3.
Q7 has never really been a success for Audi, so I do accept that it's losing to Range Rovers, X5s and MLs.
A8 is not a competitor for an S-Class and I don't think it will ever be. The luxury and comfort image that Mercedes has established for their S-Class over the years can't even be beaten by BMW...
R8 vs Gallardo? Well, it's quite tricky here. While the "regular" R8 has pretty much the same 4.2 V8 engine that you get in RS4, the R8 V10 has the same engine as Gallardo.
They're different cars for sure, but essentially the same company is making them. The only work that Italian do for Lambo is the design - the rest is done by Audi nowadays.
I would say that the current strongest selling point for Audi are their hatchbacks and "everyday" diesels.