Basically the situation is as described in the title, the oil light comes on intermittently, but when I check the oil it appears full. What could be causing this?
The light comes on when the oil pressure is low. If the oil level is fine, I would say you have either a faulty oil pressure switch (or a bad contact to it) or a dying oil pump. I would hope for the faulty switch if I were you - it's a cheap fix. If the light is intermittent then the switch is also much more likely.
However if the light only turns on on idle and goes off when you increase the rpm, then the pump is a suspect as well.
If this is a high mileage engine, in addition to a worn oil pump or a faulty oil pressure sensor, the fault could also be caused by worn bearings within the engine. If the bearings are worn, more oil can flow through them than is designed to, which can lead to a low oil pressure. How may miles/km has the engine done?
There is a common issue with the VW oil pressure sender and its connector. Since the car is turbo, I'd have the sender changed first. If that solves then good. If not, you will need to have a mechanic take pressure readings. Its common for the turbo to start cooking the oil and blocking the passages once its dying. Not a good thing to waste time on.
Another possibility is an almost-clogged strainer at the oil pickup.
VW four-cylinder turbo motors from that era were made with undersized crankcases, perhaps because of space challenges in the body of the car, which often resulted in overheated oil that "coked," or formed hard bits within the oil system. These bits clogged the pick-up screen on the oil pump, sometimes leading to engine failure. Such clogging might result in an occasional low oil pressure warning.
There's a difference between an oil pressure sensor and an oil level sensor this implies that an oil pressure sensor usually is in red light while an oil level sensor is in orange. Physical inspection shows that's an oil pressure sensor is on the engine oil filter while the oil level sensor is on the oil pan underneath so......so I suggest you change the oil level sensor underneath the pan