To answer your questions.
 

You can remove the spare tire to drop the cargo floor for more space according to page 51 of the Owners Manual. But unlike the MK2, there is no mobility kit compressor/puncture foam, and the OM warns you to check local laws about removing the spare tire.

On a positive note, the rear seats lay flat on the MK3, unlike the MK2, so there is more cargo space.

One of my neighbours drives his 8 year old kid around in the back seat of his MK2. Note that there are many warning labels about the maximum height of the rear passenger, 145 cm or 4'9". II. My normal driving position I have never been able to fit my fingers between the back of my seat and the rear seat on either my mk2 or my MK3.

Many thanks to everyone for their responses, which have been most helpful - the fact that the seats fold flat did escape me before, so this is good to know, but I do still have the leg and headroom issue in the back to think about!

Will take the kids for a test drive in the Mk3 to see how tight it really is, and how much growing room they actually have! :-)

Thanks again to all!