The magnets are required to put the tranny into tip mode and to shift gears. When the lever is pushed to the right a switch is activated by the magnet engages the Tip circuitry. There are 2 other switches/sensors that the magnet activates to shift up and down. The sensors are located on the circuit board under the chrome shifter trim. What typically happens is the glue holding the magnet onto the plastic fails and allows the magnet to escape to the nearest metal part. Double check that your magnet is still there.
I can't tell you if that's your only problem, but it's a good place to start.
The long skinny magnet will end up on the far right of the assembly. There are tracks (left to right) in the flexible rubber cover. The multiple plastic chips are just to provide a finished look the shifter assy as the lever moves left and right. IIRC, it was a bit tricky getting the magnet lined up right.
Here's a LITTLE mor info: http://forums.vwvortex.com/zerothread?id=2810322