As a Volkswagen locksmith and list vendor, I would recommend cutting to code
a new key.  With the code number from the handle, a new key can be generated
assuming that the keying has never been changed on the handle.  Most of the
time that will fix the problem.  If not, it is possible that the internal
lock wafers have worn, which can be replaced.  In a few instances I have
seen the body of the lock so worn that the malady can't be repaired, but
this is rare.

As far as lubrication, DO NOT use graphite.  It will gum up when used in
conjunction with the grease typically used in VW locks, resulting in
greater-and-greater need for lubrication.  A good teflon-based spray lube is
the proper lubricant for these locks.  We recommend Super Lube, but Tri-Flow
works well also.

These locks are fairly easy to repair, but many locksmiths do not have the
wafers and springs (they are fairly rare) to replace if necessary.  Expect
to pay $12-$25 for generation of a key by code.  I will be happy to explain
further if you wish to contact me off-list.  Good luck.
Steve Sandlin
www.steveslockshop.com
'84 Wolfsburg Westy
'79 Transporter
'00 New Beetle