From what I've read, the 8v has more torque and grunt, so you get that wonderful growl when you put your foot down when cruising near idle, but the 16v kicks out more power higher up the rev range, so it's ultimately more powerful, but you have the push the engine further to get it. Maybe one of the reasons behind the better reliability from the 8v block. Personally my driving style suits torque over power so I'd go for the 8v, but it's down to how you drive, and as with everything else, the possible extra costs of one over the other.
I've a mk3 Golf and I'm very happy with it. Build quality is fantastic and parts are pretty cheap, along with easy maintenance. The mk2 is still very well supported as far as I'm aware, and should be subject to the same build quality as the mk3, but in a lighter and better handling body.