I don't have the S4, but I do have an A4 with the 1.8 turbo engine in it. I absolutely love it and don't really have that many complaints with it. If you don't do the work on it yourself you'll get raped from import car repair costs though (similar to a LR).
If you drive the 1.8t engine around the city, it gets about 21-22 mpg as has been said. However, that's because it's a turbocharged car. That means that the actual displacement of the engine goes up when the turbo is spooling because you are forcing more air into the cylinders. larger displacement = bad gas mileage generally. But when you drive on the freeway, the turbo hardly ever has to spool up so it's basically like driving a Geo Metro engine-wise with the 1.8L engine. I generally get about 310 miles to a 14 gallon tank. I went on a road trip once though that was fairly flat at freeway speed the whole time and I got about 460 miles to the tank. So when you don't use the turbo all that much, they get great gas mileage. As soon as the turbo kicks in, gas milieage goes down the hole.
The S4 is another story, don't buy an S4 for gas mileage, they're sports cars that are made to go fast, not get good mileage.
As for the turbo going out on you, it can happen, but it generally only happens if you chip-tune the car and make the turbo work harder than it was designed to. A turbo replacement is going to run you about $1300. I am at 110,000 miles right now on mine and haven't fixed anything besides general bearings and brakes and the guy that owned it before me didn't use the right kind of oil, so I had to replace the oil pump because the oil sludged up in the pump.
Here's some pics