Turbo information Help!!!

I have a 1998 Vw 1.9 diesel TD transporter which I belive has an ABL engine. It has done 98k and ran fine...returning good MPG... It was burning some oil (around a pint a week), but rings were dismissed as there was no blowback when you removed the oil filler cap. A VW mechanic told me it was valve stem oil seals which he replaced. he took it for a run afterwards then phoned me to say their had been a sudden loss of power.

He now tells me the turbo is blown. He had removed the pipe from the compressor housing to the air manifold and when he revved the engine oil could be seen....

Is it correct to run the engine with this hose removed?....could this oil be due to pressure on the seal from the exhaust side of the turbo...
A replacement will cost me a lot of money plus his labour cost:mad:

Somebody please advise me before I go out and spend my hard earned money..........

JohnB