How's your boost gauge response look? Is it acting normal? Waste gate could be stuck open. I've read where the actuating rod attactment can get corroded and stuck.

I found a leak at the blow off valve wich returned some power and only slightly better gas mileage but on this weekend we checked the timing and it was set at 0 so we put it to 15 dec. and the cars has lots more power and snap and the gas seems a ton better maybe 26 mpg thanks for the help

Wow! To guzzle 10 gals for 85 miles making 8.5 MPG it would cost me over $20 a day just to drive to work and back! Mooney is right however look for a split hose leading from the turbo discharge to the intercooler pipes and back over to the engine intake. Remember the intercooler inlet is going to have alot more heat to deal with under pressure and the rubber joiners are going to have alot more stress. A small slit in the hose can dump alot of air when under pressure, even 2 pounds against a 1.5" slit is a big leak to the entire system. I had a 1/4" bolt back out of my intake on my turbo-diesel and dropped my boost to 3 pounds so it doesnt take much.
Look for an oil streak or darkened areas around the pipes where it might indicate air leakage. Another remote culprit would be the compresser scroll O-ring that has failed, its what seals the compresser to the turbo body and its 1/32" neoprene rubber. Rare but I have seen them fail in the past.
Also is the wastegate closing all the way?

good luck

Brandon

Hi Peter, I know when we spoke I suggested the O2 sensor as a possible culprit; I think it's more likely that you've got a turbo hose starting to come apart, just opening up under boost but closing up enough under vacuum that it'll still idle without sucking air. Remove the turbo hoses and check them carefully, I wouldn't be surprised if it's the hose from the turbo to intercooler, right down in the bend.
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Chris, Dartmouth NS Canada 70 M-B 280SE, 83 245DL, 84 244 turbo, 90 780 turbo, 92 VW Golf, 90 740 Rex/Regina