I do find it a bit of a joke that the dealer suggested that Audi UK would only pay 90%, and not for the obvious reason. In other cases where it's not wholly their fault and they are making a goodwill contribution one would imagine that something between say 30% and 50% might be appropriate. Even when it really is their fault but the owner has to take some responsibility (like not following the service schedule), then I might imagine they'd pay up to 70% or even 80%. But at 90% the money they save is really inconsequential. I can imagine that some ****head at Audi UK has spat his dummy out about fixing out of warranty cars and has decided that owners should be asked to pay 10% just as a matter of principle.
@Stephen Payne - it is reasonable that the oil level could be below the MMI min before the warning.
What colour is the smoke? Is it only at start-up or is it constant? I'd advise that you take a video of it in case (you never know) the dealer concludes that the test shows nothing is wrong. As I'm sure you are aware, smoke from the exhaust, particularly on a petrol car, nearly always indicates a serious issue in the engine.