Have you used your existing transponder chip? Take the badge off then you will see a philips screw to seperate the key where the transponder is situated.
http://uk-mkivs.net/forums/t/261796.aspx
http://uk-mkivs.net/forums/t/261796.aspx
x2I found you sometimes need to warm them up to soften the glue they held in with. Sounds like you haven't swapped the little chip over in the top half of the key