This is a really tough problem, which I've encountered more than once.  I
have always dropped the engine at this point and rented the VW special
tools (described in Bentley)  from the Bus Depot to disassemble and
reassemble the pistons from the rods.  This adds up to quite a bit more
work but allows you to replace rings and clutch easily as part of the job. 
The tools consist of a reamer which allows you to remove the little ridge
of metal where the wrist pin comes out of the piston (it absolutely,
postively will not come out if you don't remove this little ridge some
way).  Another is an expanding pin tool which expands a rubber insert as
you tighten it and gives you a firm grip on the wrist pin to allow you to
pull it out.  The third, less essential, is a tool that allows you to hold
up the rod so you can line the piston up with it upon reassembly. 

The third tool is easily made from a coathanger.  The first two have been
homemade by various people and are described in the archives, but I've
found it much less hassle to rent the tools from the Bus Depot.  I think
the charge is about $20 or less, plus shipping both ways- its been about a
year since I last did it.  Ron also likes you to buy your parts from him in
order to rent the tools.

Alternative ways people have dealt with this problem is to install rings
with a small compressor while tapping the cylinder back down over the
piston.  It is hard to find a ring compressor small enough to fit, however,
but I know this has been done.  One approach is to fabricate a spring
compressor from a piece of steel banding of the type used to secure
shipping containers.  This approach is easier if the stuck cylinder is 2 or
4 rather than 1 or 3 but has been used to do all of them.

Good luck,
Bill
www.geocities.com/yosemite/gorge/1706