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It sounds like you need castor shims. Most of the advertisers in the VW mags offer them pretty cheaply. Be sure to get a pair of the long beam bolts too. That's one cheap option to help with you're squirly steering. The dropped spindles will help and also add the shock extension back into the suspension. Its more expensive, but from the advise that has been told to me in the past, its also a better solution because of the shock problem you eluded to. You may also be suffering from bump steer. I'm not positive on how to solve this as I have the adjustable beam with dropped spindles already. That combo has worked pretty well for me, though.
Hope that helps.
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