In the numerous discussions on variable servicing I have noted reference to the "oil quality sensor". How does that work then?

Specifically -

1) is there actually a 'sensor' or does the brain calculate oil condition based on mileage and driving style only?

2) if there is a sensor does it only detect how dirty the oil is, and if so how (in simple terms)

3) can the system detect if more than a small amount of non-longlife oil has been used to top up (one post mentioned pigment marking)?

This doesn't exactly answer your question but it'll give you an idea of the things that are being monitored. These are the channels concerned with service schedule.

How do we get that window with VAG-COM Stu?

It's the SRI reset in the applications screen that can be found on the main VAG-COM menu.