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Update: it's a vacuum leak
After unfruitful trips to a local indie German shop and the Santa Barbara P-dealer, I followed a suggestion from "itsnotanova" to check for vacuum leaks. I found one (using starting fluid method) in the top breather hose connection with the AOS and fixed it. Now the car runs without the hesitation under acceleration. Still trying to sort out the TC light issue, but the car is running great. Thanks again, to Woody for his research and suggestion.
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