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You might read; this 1.8T head DIY:

http://newbeetle.org/forums/1-8-liter-turbo/35490-bad-timing-belt-need-head-rework.html

This page post #48; recommendation, is sand down the top of the pistons, where valves made contact:

http://newbeetle.org/forums/1-8-liter-turbo/35490-bad-timing-belt-need-head-rework-3.html

The head damage:

Needless to say; you need to ship the head out for repair or do a exchange with a cylinder head shop, if you want to speed things up, these guys have rebuilt heads for a reasonable price: do a google search for other vendors, $650 to $800 seems to be the going price for a rebuilt head for a 1.8T:

http://www.shop.headsonly.com/VOLKSWAGEN_c28.htm

http://www.cylinder-heads.com/automotive-cylinder-heads/

We have dealt with them at my brothers shop; had good service from them.

If your low on cash; you might try a junkyard or look on a used head on, ebay or in the classifieds on vwvortex.
 
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