The most likely source for oil in the intake is a leaky turbo seal.

The switch doesn't regulate boost, it regulates fueling. When turbo pressure rises above 1.1 bar, it switches off the boost switchover valve, which prevents the boost signal from reaching the Alda. This has the effect of reducing fueling.

Boost is regulated by the wastegate, which is pneumatically actuated by boost pressure above .9 bar on most older Benz's. Above that pressure, the wastegate dumps exhaust directly into the outlet pipe, bypassing the input turbine.