You're correct in saying that the ABS system reverts to non-ABS in event of module failure. This allows you to still have brakes, even if you're ABS goes kaput. What Calmingstorm said seems to be a logical cause for your issue, but these cars are rarely logical. I'd just pull the module, be aware that you're much more prone to lock up, and go from there. Consult with audi. As far as I'm aware they dont charge you for advice on the phone... though I may have just given them the idea...

 

Success. The cause of this is the wheel speed sensors are not all reading the same, making the ABS unit think that a wheel is slipping.

I ended up replacing the ABS ring on the left rear. I could not found anything wrong with the old one and the gap was good between the sensor and the ring. So I test drive the vehicle with the VAG COM connected and saw that the left rear was lower then the other sensors. The new ring is diffence then the old one so they must have updated the part.

ObnoxiousDrunk I think you have two problems: one is a wheel speed sensor in the front and two the control module for the ABS unit. Question do you have a VAG COM or can use one? Also check that your wheel speed sensors are all pushed all the way in.

And thank you all for your input on this issue.

 

No VAG-COM, but thanks for the input. It may be that my buddy and I may have inadvertently damaged a sensor when we did the suspension. I'll double check the sensors and look into either getting the VAG or finding someone who does.......VAG-COM that is.