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The features you are describing do not apply to an '07 A6, only the newer cars function that way.
OP- If you are stopped and you put the car in S Auto and then hit the down-shift paddle, you will start in first gear and be in paddle mode.
If you are stopped and you put it in S Auto mode and then you up-shift with the paddle, you will start in second gear, or you can hit the up-shift paddle again and even start in third gear. It won't let you start in fourth.
As stated above, when you are using the paddles the car will not up-shift for you, but as you come to a stop, the car will down-shift automatically, but it will stop at second gear. You must down-shift to first with the paddle.
Any time/any speed you want to get out of paddle mode, just move the shifter to D, and either leave it there or put it right back into S Auto.
Congrats on the new car, definitely get your Owners Manual, there are a lot of idiosyncrasies about the C6 that aren't very intuitive.
Thanks. I deleted my message so as to not confuse with incorrect info.
When i got my 07/A6. I didn't touch the paddle shifter for a couple months. Then one day i started to play with it, took a while to get used to. WOW this is the best of both worlds. After installing a Corsa Sport exhaust W/X pipe i seldom use the "other" mode. I love when i pull into the local car show, paddle her down to 1 and let her gurgle and pop as i find my spot. it's a real head turner as well as meny compliments on how nice she sounds.