I have a 1998 VW TDI (project car; not currently drive-able), which legally pollutes way more than even a non-compliant modern diesel VW. I run 100% biodiesel in it, which (being carbon-neutral) satisfies my enviro-smugness even if the particulate output is significant.
If I had a 2009+ VW instead, I would have absolutely no moral qualms about taking the reduced payout, keeping the car, and then having a third-party tuner modify it (illegally) to increase the power output and pollution beyond even the non-compliant original condition. (I'd also have the tuner adjust the parameters of the DPF regeneration event to enable it to burn biodiesel, pending research on TDIClub.com to see if that would actually be sufficient.)