Well earlier tonight I was racing a friend of mine in my 87 TII. When I parked I saw smoke coming from the hood. I opened the hood and saw white smoke coming from the turbo and notice little drops of oil on the ground below. I drove it around a little bit and it seems to boost fine but it just smokes and smells like oil. Is it possible I just blew an oil seal that needs replaced or could it be something else?

 

Chances are that the turbo is fine, you have a loose oil feed line or coolant line that's dripping onto the turbo and making the smoke. My car does this too, and my turbo is brand new. It's a BITCH to get to those bolts to tighten them up, though....