I wish I saw this earlier, I dont get onto forums much anymore with work.
Anyways, this is one of two problems common with age and that engine managment. You need to first test the ignition control mod on top of the ECU is getting 12v and grounding. On a mk2 VW they last forever because they get a lot of cool air over them but they can fail.
The more likley issue is the hall effect. You will need a low amp draw or LED test light. Dot use an old school one or you will back feed too many amps through some delicate circuit boards.
Disconnect the wire harness from the distributor body. Use a multi meter, you should have close to 12v on the 2 outer pins of the connector. If not suspect your ignition mod, Ecu or a fault in wiring. I you have 12v its probably the hall effect.
Re connect the socket and peel back the rubber boot so you can back probe the wires going into the connector. Disconnect the centre distributor wire and move it some wear close to the block so it can ground. Back probe the centre wire of the 3 pin connector going to the side of the distributor body and connect the other end of the LED test light to battery positive. As you crank the car with the key your test light should flicker. If nothing happens the Hall Effect is toast.
When they die its usually one and done. Meaning, one day your car died on you, and that was it, never started up again. In some cases, and I’ve experienced this it runs fine and dandy untill it gets hot, the heat messes with something in the sensor and it cuts out. Let it sit 20 min, and it starts again.
The big downfall here is you need to replace the entire distributor body with hall effect sensor in it. Witch means carefully doing it so you don’t ruin the timing. If you are not confident you can install a new distributor perfectly and not have to re time it you should take it in to a VW dork who know how to properly work on Digifant 2 cars. Just trust me on this. Hopefully my explanation makes sense.