Volkswagen, along with Jeep, Mercedes, and Audi, is one of the few brands that has brought modern diesel technology to the U.S. When VW introduced its upscale luxury-sport SUV, the Touareg, in 2004, clean diesel power took its place at the top of the model lineup. Now, for 2008, the Touareg enjoys a mid-cycle refresh, with a number of small improvements. But most of the main features that have attributed to its success, smartly remain intact.

Sharing its basic underpinnings with the prestigious Porsche Cayenne, the Touareg boasts much of the same look and feel of its higher-end German counterpart . But since the Cayenne doesn’t offer the diesel option, the Touareg TDI becomes a logical choice for those shopping for an SUV that excels in luxury and performance, and touts diesel power.

The Touareg TDI is defined by its powerplant, a mammoth 5-liter V10 turbo diesel engine that is engineered to cleanly burn today’s ultra-low sulfur fuel. It produces 310 horsepower, and an obscene 553 pound-feet of torque, thanks to the low-end power diesels are known for. This amount of torque allows the Touareg a punch off the line that even surpasses the standard Porsche Cayenne. It also grants the Touareg the ability to confidently tread off-road terrain.

However, the Touareg TDI is not the example to use when arguing that diesel power is more efficient than gasoline power. The Touareg TDI is rated at 15 city/20 Highway. Those figures are better than that of the standard gas-powered Touareg, but by a very thin margin. Beyond efficiency, this SUV’s advanced diesel engine burns clean enough to be 42-state legal. It does not make the cut with air quality standards in California and much of the Northeast.

VW has reported that the V10 TDI will likely be phased out in favor of a smaller 3-liter V6 turbodiesel in 2009. The reason for the move is three-pronged. First, the V10 is much more costly, which has resulted in a very limited sales volume. Secondly, the new V6 powertrain will have a urea-based diesel exhaust treatment that will make it 50-state legal. And lastly, though it will certainly not have the raw power that the current engine has, the smaller, lighter diesel will drink less fuel. In the end, then new V6 will be priced lower, be more widely available, and have better efficiency. Who can argue with that?

The Touareg TDI offers permanent all-wheel drive, as well as a four-corner air suspension that raises and lowers the vehicle (lower it for more performance handling; raise it for higher ground clearance). It also comes with Electronic Stability Control and Hill Climb and Descent Control, both of which elevate the Touareg’s capabilities on and off-pavement, respectively.

Ride and handling are what you would expect from German engineering. The Touareg TDI is agile and well-balanced, while also granting passengers a high level of comfort. For this reason, it makes for both, a very good daily driver, and a solid family vehicle.

The Touareg TDI aptly blends luxury, performance, off-road capability, and everyday practicality, all in almost equal proportion. Add in its clean diesel power, and this SUV becomes one of the most unique offerings in its segment. Volkswagen may have arguably created the most well-rounded diesel SUV on the market.