Wagons make a lot of sense for families. I have two kids, and the size of the vehicle works well for our family of four and a large dog. Not too big and not too small.
We have the 1.8T and manual transmission. Manuals are hard to come by. The turbo four has enough power and gets good mileage.
Handles with confidence and rides well. We have Bilstien shocks which help a lot.
For a while we had two child seats in the back. That can certainly be done in a smaller car, but the room of a midsize car is appreciated.