Charles:
I can not see why the POSITION of the sender has ANYTHING to do with the
problem. Gravity would have an insignificant affect on pressure.Sounds
like the VDO techs are a few burritos short of a combination plater. I
would expect to see at least 20 psi at idle whed hot and 40 psi when
cold. Can you insert a tee at the new sender and  screw in an analog gauge? I have seen small ones for under $15 or you could use a compression
testor if available. Then you could see if the remote gauge is
calibrated.
Another item; the old sender is only a pressure SWITCH . The new sender is an anolg device with a continously varing output proportional
(theoretically) to oil pressur. 
You have two oil pressure sensing switches.
Here is some extra info.................
The low pressure switch (4.4) must open between 2.2 and 6.5 psi.
It is located between cylinder 3 and 4
The other switch (13.1) must close between 10.9 and 14.8 psi.
It is in the vicinity of the oil pump.
The flashing LED is associated with the 4.4 sensor.
The flashing LED and the buzzer occur with RPM>2000 and no switch closure
from the 13.1 sensor.
Good Luck
Ken Lewis
kdlewis@juno.com
86 VW crewcab 
85 VW Vanagon GL
60 356 coupe