Most likely the waste gate is stuck open, venting all the exhaust around the turbo so it won't produce much boost. Slight vac would indicate some function, but not much.

However, slight binding when moved manually means no decent turbo speed, so if the wheel shows ANY roughness or stiffness when you turn it by hand, it will not produce boost, period.

There are several options -- any decent diesel injection service will be able to fix it, most likely it needs a cartridge (really a whole turbo minus the inlet and outlet housings). You can do this yourself if you want, you can even grind the bolts off if necessary since you won't be doing anything but swapping the bearing housing, shaft, wheels, and bearings out whole.

You can also get the bearings replaced by the shop if you want, this may or may not be cheaper. I woudn't do this my self, as you really need to balance it afterwards.

Check to make sure the linkage between the wastegate actuator and the servo is still intact -- on some of the turbos used by Benz, this linkage can come off and you will (obviously) get little or no boost with the wastegate hanging wide open...

Peter

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1972 220D ?? miles
1988 300E 200,012
1987 300D Turbo killed 9/25/07, 275,000 miles
1985 Volvo 740 GLE Turobodiesel 218,000
1972 280 SE 4.5 165, 000 - It runs!