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I have heard that some all-wheel-drive systems get damaged if wheel/tyre combinations have a differing circumference.

Is this an issue with the S4?

(I am running 18" RS4 Replicas, but a 7" Avus spare - so there will be a slight difference in circumference)

No, but you shouldn't leave it that way for long (which I assume you won't 'cos it'll look a bit strange).