My apologies, i've gone through many postings that i failed to look at it again. Anyway, i did see it and i've resolved the matter except that the lock on the solenoid cable which specifically cautioned not to lose was lost. I even kept it in a plastic box when i started my work but in the process of installation i managed to lose it. However, i'm very happy to advise you and CoolAirVW, bjohns86 and the others who in one way or another showed concern that this whole problem is resolved. My car is now shifting normally and very efficiently from first to fourth gear.I detail your exact questions in the beginning of this thread. Good luck!
Your encouragement and concern empowered me to do what the VW dealers could not or refuse to do. I couldn't have done this if it were not for your strong advise that i can do it. By the way, all the solenoids were working but i replaced them anyway because when i was removing the wires one of the connector was broken. Since i bought all the parts from the party you suggessted i decided to just install all of them. I suspect that the wiring harness is the one at fault. It's so nice to see a 62,000 km car that for three years was in limp mode is now working very efficiently.
Thre are two other terminals beside the the Solenoid harness on top of the transmission. One has a Yellow, White and Black wire. The Black wire was cut and i can't find where it is connected too. I took a picture but i don't know how to upload it. Could this Black wire be a Ground wire?
Thank you everybody, this site is "really great!" Not only have i learned a lot, i've done what i would not have done before.