I'll try and make this simple. I've had 3 240's and this is my first Volvo in about 5 years, I picked up this 87 740 turbo. Was running like a champ besides some brake squeal but the pads are fine so I'm living with that. Here's the problem I can't live with and have no experience with.

When I first got it there was this cycle of compressor noise every 8-9 seconds or so and when it would go the car would lose a little power, nothing big. 3 weeks of driving no problems. Took it on a road trip, way there was great. Half way back and 160 miles in the middle of nowhere the compression noise started to sound real bad; kind of like when you try to turn the car on when it's already running. Then on one of the 8-9 second cycles it just stopped and I thought, "what a great car it fixed itself!" Then I noticed the burning smell and the white smoke that seemed to be coming out the tail pipe. The car was still running strong however at 70+mph. All the belts are fine, car ran all the way home but sounds horrible, kind of like metal grinding and I can't pin-point the noise maybe near the alternator? The smell was still there when I got home but the white smoke stopped around 5 mins after the incident. Power windows and blinkers fuse blew and when I replaced this morning blew again? I have no experience with turbos, seems like there may be oil burning somewhere though. Any help would be very appreciated as I don't know where to start. Thanks- Mike