Started it up, and everything was fine, though it was a bit smokey. Went for a short test drive, and yea, smokey as $$%. Gave it some rev, and it made turbo wooshy noises. Cool. Came back in, tightened some of the fitting to address some minor oil leaks, went for another drive to get some stuff from Repco. Still smokey, and on the way back, thought I heard some odd noises, but thought I was imagining things.
Today, took the car to work, hoping that the seals might tighten up and itd stop smoking. The noise from yesterday got more noticeable. Got to work, immediately checked the shaft for play, and yep, it has some side to side play now. Looks like the sound I heard might be either of the turbo wheels contacting the housing. Ill be taking stuff off tonight to check out the damage - luckily its just a cheapo turbo, but it was brand new, so thats annoying. Dont mind replacing it and/or the manifold. Also lucky that the turbo wasnt feeding the engine, in case metal from the compressor housing was shaved off. But Im really hoping there arent metal shavings from the journal bearing now in my oil.
Any suggestions for what went wrong?
The oil drain line obviously needs to change. One thing I noticed was that oil kept spilling out of the line if I disconnected it from the turbo and lowered it, so the bung must be below the level of oil in the sump, at least when sitting, meaning the entire drain line is full of oil. The bung is pretty high up, so perhaps the sump is overfilled. Heres a pic from below.

So, few lessons learned here, especially with spinny things that require oil. 1) Water would probably have been ideal. 2) Proper oil drain is absolutely vital.
Couple of questions.
1) What kind of oil flow should a journal bearing turbo have? This is a pretty small turbo, but I gather that these bearings require a lot of oil pressure to make the shaft float.
2) How exactly does a restricted drain line cause problems? I would have thought more pressure at the bearing would be a good thing.
3) Could I clock the center housing like 20 degrees without issues, in order to gain a little more vertical drop for the drain line?
4) I plan to source my water from the side of the block, and return to one of pre-pump coolant hoses. Where in particular should I be looking?