Blue cap is on the larger black line, which is just a vent (fresh air source) into the passenger compartment. It connects near the power brake booster, so I capped it off there and yanked the black pipe out of the engine compartment - one less item to clutter things up!
Yes - if you bypass the s/o valve and run pressure directly to the ALDA, and power increases, your turbo is probably doing at least *something*. If possible, please do the following & post the results:
On a flat road, time the car from 0-60mph
with a stopwatch. Also post the elevation you live at, along with the time. A good time near sea level is 10-11 seconds for the sedan, and 11-12 seconds for the wagon. If you're in the teens or slower, something is definitely not right...