I'm depressed, but my clutch isn't.
Driving home today in my sweet little lemon, the gears stopped catching smoothly as I shifted. The engine would race a little and then it would catch as I eased up on the gas pedal. Then I could tell I was starting to lose my grip as I could barely make it up a hill.
This portion of your description of the problem sounds like you're describing a sliping clutch. That could be that your friction plate is shot; your pressure plate isn't clamping sufficiently; or your hydraulics aren't allowing the throwout bearing to fully relax.
As I turned into my driveway the clutch would no longer depress. It's locked in the upright position, just like the flight attendant would want it, but that's not how I want it to be. I want it to depress so I can switch gears, which, in turn, will allow me to drive again.
This part of your descriptions seems to be describing a pedal which can't be pushed down. Adding the two parts together is making me wonder if your problem might lie in the actual pedal box. The cross pin may have worked part way out, which was initially preventing the pedal from fully returning; hence the slipping (engine revving, barely able to make forward momentum).
If the pedal can not be pressed towards the floor, it seems more mechanical, and perhaps, now, the pedal cross pin is so coked as to prevent any pedal shaft motion.
I checked the clutch fluid reservoir and guess what? It was full, so that's not the problem.
Do I have a master and/or slave problem?
To positively eliminate the hydraulics as the possibel problem, crawl beneath the truck and crack the bleed screw on the slave. Depending on what year S3 you have, the bleed screw is in the end of the slave, or out at the end of some pipework (remote bleed screw) With the bleed screw open, have someone try depressing the clutch. If it now goes down, it may be a mechanical problem with the throwout arm, or release bearing.
Another possibility is that the check valve on the end of the master piston isn't releasing, because there is pressure in the line still with the pedal all the way up. A few operations of the pedal could have slowly pushed the slave to it's limit, and now the system is hydrolocked. This is probably due to a badly adjusted pedal piston rod.