The fluffy exhaust is clearly visible on the lower part of your photo .

I'd say just replace the entire turbo with your spare assuming it spins freely by finger (! engine OFF !) and you never get thin blue smoke out the exhaust .

DO NOT swap the turbo without changing the O-rings and rubber oil return tube boot ! .

The stuff in your first photos is the non metallic insulation that was glued to the steel floor board ~ scrape it all up and see how much metal you have remaining .

__________________
-Nate
1982 240D 408,XXX miles
Ignorance is the mother of suspicion and fear is the father

I did then what I knew how to do ~ now that I know better I do better