$8500 sounds about right to me, I sold a 2002 Stage "2+" S4 last year for about $10k. It had 100,000k miles. Had no issues to speak of aside from the blinker was sporadic in working, but the stage III setup is pricey!
Good luck with sale, I'll always have a soft spot for B5 S4's. Such a sleeper... had a blast in mine, but happy to be in something newer and (for me) faster.
Stage 3 S4s typically make right around 400awhp. Meth or E85 will get you into mid-400's. I had it road tuned with about a dozen logs back and forth to the tuner so I don't know exactly where it's at. AWD dynos are hard to come by around here.
Update: In an attempt to solve the rough idle issue I started looking through the emissions system and found a faulty check valve. I have replaced all check valves in the system and it is humming like a sewing machine at idle now. I went ahead and ordered the rest of the emissions hoses (spider hose) with new upgraded 4 layer silicone hoses that should be here this week just in case any of those are on the way out.