On one of my 2.1 rebuilds, I reused the old 90,000 mile hydraulic lifters.
I have tried 10 or so different lifter preload settings, between 2 turns of
preload to actual clearance.  Currently I have it at 6 thou clearance hot.
There is no lifter noise at start up.  Hot compression is about 15% higher
and power seems higher with 6 thousandths clearance.  The engine revs more
freely (throttle seems snappier) as I decrease the number of preload turns,
although it seems a bit louder/rougher (I don't mean lifter noise).

When adjusted with preload, the engine starts and runs fine. No indication
that anything is wrong.  Its just that when I alter this setting the engine
does change, i.e.. compression, sound, power, revving.  Talk on the list of
this topic lead me to experiment with adjusting preload.

It seems these VW hydraulic lifters are behaving like solid lifters.  If
that is the case,wouldn't increasing preload would also increase duration
and lift?  If duration is longer wouldn't I expect lower compression?
Years ago I remember trying different cams in an engine and noted how it
affected compression.
I know it may seem illogical, but I'm starting to wonder if I should use
compression as a measure of where the valves should be set.
Maybe someone can explain this.
I would like to know what other peoples experience is.  What happens when
you adjust to clearance on an unopened engine.

Gary Lee