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There is a PCV system on this engine. No "flame trap" per-se but the hoses are there as well as the breather box. The box may be clogged or one of the hoses.
You can take a length of hose (I think it's 5/8" diameter), connect it to the breather box, and remove the oil filler cap. Blow through the hose and if you feel/hear your breath coming through the oil filler hole then your box is not clogged. If your PCV system were clogged you would probably see oil leaks from the front or rear of the engine.
Since your car is a Turbo, chanced are your turbo seals are going bad (or have gone bad). This is the most likely problem with you car considering the blue smoke is coming out of your exhaust. Another possibility is your piston rings may be gunked up and not doing their job, one of them I believe is an "oil scraper". I have heard excellent things about an engine flush-type product which helps clean the engine over time. It's called Auto-Rx. Do a search here on the Brickboard and also on the internet. I am planning on doing a treatment on my '80GT since it's pretty gunky in there. It's expensive at $25/bottle but for what it does, it's the cheapest thing out there.
It's probably not the end, it will depend though on how much you can afford to pay for the repairs (turbo is expensive).
Good luck,
Bean
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'80 242GT 92k, '94 945T 123k
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