A little seepage from the outlet side of the turbo (to the intercooler) can be normal. Make sure the air filter is clean and the box is free from restrictions. Also the oil filler cap seal may not look bad....but every time i change my oil, I have to replace it or it will seep 100 miles after the oil change. The local volvo shop by me replaces that seal on every car on every oil change. as far as the V-8 swap...I would go with the 302 Ford. Ive heard of chevy swaps cracking strut towers and whatnot from the added weight. As for the 302, in stock form with cast iron heads, it weighs approx 100 lbs. more than the wonderful 6 cylinder diesel engine put in these cars. So with a nice set of aluminum heads, you wounlnt really be adding any exrta weight. the fit is prefect, and its pretty easy to squeeze 300 HP out of an EFI 302 and still pass smog, easily! and you can do an auto or stick. (ive done much research and come to the conclusion the 302 V-8 will be reserved for a nice 242. the 765 keeps the volvo powerplant)