Agreed. 1.2L is a false economy for propelling such a heavy car, especially if and when you'll be using more of the low-range gearbox, and you want to pull a camper with it to boot?! A thorough understanding of BSFC maps should make it abundantly clear. After reaching a best point, going higher up the torque curve toward full-load causes BSFCs to get worse and EGT, smoke and NOx to go through the roof, plus engine lifetime to go down.
http://forums.tdiclub.com/showthread.php?p=4169223&highlight=BSFC+map#post4169223
The previously referenced D2 A8 with a 1.2 swap is a FWD model and, don't be misled, a C5 Allroad is significantly heavier than a FWD D2 A8. That project car in question underwent a further serious weight reduction programme that doesn't really make it practical as a daily driver, not to mention a car that will pull a trailer. Look up Vekke's posts for details.
Since your Allroad already has been swapped out for a 6-speed gearbox and BHW, aside from the usual weight reduction, rolling resistance, friction and aerodynamic improvements, there are many things you can do to improve the fuel consumption with that setup, including an Eco tune; getting rid of the low-range box that adds weight and friction and revising the gear ratios (what transmission code and final drive ratio are using?); using low-viscosity engine and driveline fluids); etc.
The C5 Allroad with a 6-speed manual / TDI swap is my personal favourite if I were to embark on a project. Here I thought to engineer my own stop-start system and mild-hybrid system by connecting a bank of batteries under the rear seat or trunk (finding a used DC Tesla Powerwall would be perfect!), and re-wind the alternator to the maximum amperage the casing will support - this is routinely done for competition car audio systems and can go up to 300 amps giving about 4.5 kW of retarding power that I can command with a steering-wheel switch to go to full-charge mode when I'm going down hills. At other times the alternator basically freewheels saving the parasitic losses.
PS: I used to live in QC (Sherbrooke) and Mike (yatzee) is a good friend.