running K04s on stock software is perfectly fine. The only problem one might encounter, more likely in the case of the stage 1 chip, is boost spiking on ramp-up (ie, when you smash the throttle and boost builds). This is what JBear was trying to explain, and happens because the flow characteristics of K04s are different than what the engineers designed for (ie K03s). An MBC placed in parallel with the N75 can be used to eliminate boost spikes while leaving full control of boost ramp and taper to the N75. Mark P made an excellent diagram and explanation of this - STFA.

The 5bar FPR you speak of is commonly used for a Stage 3- setup. There is specific "3-" software made by GIAC, and you can also homebrew it using an MBC in place of the N75 (with extensive logging and tweaking, of course). Basically what you're doing is adding more fuel to enable you to run more boost (since K04s can make more boost at higher rpms). However, there is a limit to how much fuel the OEM injectors can provide. A 3- setup uses a 5bar FPR to increase rail pressure and deliver the maximum "safe" amount of fuel. I put "safe" in quotations because while it works okay, it probably takes it's toll on the fuel pump. The oem injectors are also working very near or above 100% duty cycle in this scenario, clearly not ideal.

If you want to run anything beyond about 16psi, you need to upgrade the injectors in addition to using a larger diameter MAF housing. This is the definition of Stage 3. The larger injectors enable more fuel to be delivered to the combustion chambers. If one were to run 20psi to redline with the OEM MAF housing, it would likely saturate at it's maximum value (>350g/s or something in that ballpark) and your car would begin to run lean on the top end (very bad, obviously!). By running a larger MAF housing than Audi engineers intended, we can "scale" the MAF values down so that the ECU sees MAF values within an acceptable window. Together with the larger injectors, we are basically fooling the ECU into thinking it's operating near OEM (well, not really, but close enough) flow rates [of fuel and air]. Lemmiwinks tweaks on K03 code, stage 3 software, or custom tuning provides the fine tuning to get a proper A/F ratio after scaling the injectors and MAF housing.

And there you have it. If you haven't already, look under homebrew on Edy Jun's site. Lots of good info there.