[Keller]

You're going in a few different directions here...

Some important questions...
- What color was the smoke? (i.e. blue = oil, white = oil)
- Is the smoke coming out the tailpipe?

Its important to check your oil and coolant. A head gasket failure can blow (a) outside from the exhaust (b) outside from the intake side (c) across intake/exhaust/coolant in a myriad of undersireable ways. Option (c) can really ruin your day. (i.e. coolant in oil, oil in coolant, coolant in combustion chamber, etc...)

Provided none of those are true (which could be checked with a compression test) it could be a turbo issue. "Turbo going bad" makes about as much sense as a doctor diagnosing you by saying "you're sick".

If the turbo is the cause, most likely fault is either an oil seal or bearing failure. Neither is good, but the latter can be much worse, as it means the pieces of it may be already in your oil.

To answer your questions:

1) Remove the inlet tubing, and inlet bell if applicable. If you see a lot of oil, that is not a good sign. Take the compressor wheel and try to move it up/down/fore/aft/in/out with your fingers. Movement should be very minimal. Should it be more than perhaps a few thousandths of an inch. Should the wheel actually contact the compressor housing when moved up/down/fore/aft, the bearings are likely toast.

Examining the exhaust side is a little more difficult, but usually you can tell what is going on from the compressor side OK.

2) If the bearings are bad, pieces of them will circulate in the oil...of your new engine. If you have wheel / housing contact, the wheel will be getting damaged and pieces of it sent into your IC, and then into your intake.

3) You have a good buildup, and could probably make use of a pretty nice sized turbo. However, one concern stands out that might be a limiting factor. That is your converter. A 2800 stall doesn't have a lot of room for a much larger turbo. You could go to a TA49/TE44 with no issues and it would match nicely with that converter. But that engine build just screams for so much more.

You could go larger by using a ball bearing turbo and not feel like you were tied to a tree at the starting line or stop lights. However, I still think your options would be somewhat limited to the smaller end of the scale. With more stall, the options would be much greater; ball bearing or not.

My suggestion is to decide on some target for ET/HP. And also for cost. Keep in mind that ball bearing variant turbos get more expensive very quickly. Also decide how you would use it in a race environment. i.e. Pump gas, alcohol injection, or race gas. Don't forget: larger turbos are not as responsive at lower boost.

Work out your needs, your wants, and your desires, and we can try to help you weed through the data.