I figured out to update mine. Download the update application from the xtools website, and use the VAG401 serial number as the user name, and the password from the about screen as the password. You do not need to register.
I downloaded the updates, and it said the update was successful. When I started the diagnosis, it loaded a new .bin file. Menus changed somewhat, and new options were added. However the About screen still shows the old software version number and date. Does yours do the same?
I was able to use mine to read out the key code from the dash. I verified that it was the same as one I'd gotten previously from VAG- Tacho. This is on my 2005 Passat TDI. It was unable to get the key code from my 2003 Audi allroad.
It reads error codes just like VCDS, although there is no autoscan function to scan all modules that I can find. It has successfully found all installed features on both my allroad and my Passat.
Note that both of my cars are dual k not CANbus. I have not tried it on CANbus car yet.
The best way I can describe the interface to the modules is the older VCDS lite interface. The original modulemenus were almost a copy of VCDS, although the latest update simplified them somewhat.
It supposedly can match keys to the dash/immobilizer, although I haven't tried it. It has a few other functions that VCDS doesn't have, such as mileage changes, etc. It can code modules, do adaptations, etc.
If you have used VCDS, you can probably figure out how to use this. The manual is useless.
They include a microSD card reader used for the updates. They also include a USB cable. The only use I've seen for the cable is to power up the unit from a USB port instead of your car. There is no apparent computer interface. Windows devices manager doesn't see anything when it is hooked to the computer.
The OBDII cable that hooks between the VAG401 and the car is a straight thru cable. There are no components in the back she'll of the OBDII connector. The other end has a 15 pin male d-sub connector.
Looking at Xtools website, they had 3 or 4 software updates for the VAG401 last year, the latest in Nov 2014. The descriptions of the updates are hard to find, and the release notes are cryptic and in Chinglish. However, they seem to be actively updating it.
Support, either by email or Skype seems to be nonexistent. I've tried both, with no answers to date.
I bought mine thru Amazon. I have Amazon prime, and Amazon fulfilled the order, although it was sold by a third party. I got it in a couple of days.
If you travel a lot, you can keep it in the car. You don't need a computer or power supply to use it, which is great. It has a lot of capability for the money (I spent $80), and is very convenient. However, user support is nonexistent, so being previously familiar with VCDS is a definite plus. I can't speak for how well it works on current model cars.