http://www.renntech.org/forums/index.php?showtopic=493
http://www.renntech.org/forums/index.php?showtopic=1313
There have been 4 version of the VW/Audi switch, and then Porsche gave up for model year 2004. I once went on an Audi message board and they were have the same problem with the switch, as you would suspect.
Rather than putting in the new syle housing/switch that started in 2004, some DIYers just put in another switch. The issue is that there are several aftermarket switches (I have been told some made in China) and the aftermarket switch can fail even sooner than the VW/Audi switch. You can find the switch for something like $9 on ebay, but it may not be a quality switch.
If it is acting funky then lubricating the part you put the key in is not going to help. The problem is with the switch itself at the end of the housing.
I have a 1997 and the switch was replaced under warranty. Then in 1999 there was a recall for about 3,600 1997s. I had no problems with the switch put in under the warranty, but I had it replaced again under the recall. I have had no problems with the switch put in under the recall.
My 2 cents. Porsche should recall all 1997-2003 and replace the housing/switch with the new style since this is a known problem.