You can check the turbo by removing the intake hose and visually checking the compressor wheel for side play and see how difficult it is to turn. I would say if it's not leaking oil, is not contacting the housing and turns freely then the turbo is probably fine. Keep in mind that if the engine does not fuel up then it will not make boost either. I'm not really familiar with the 354... but check and see if it has a waste gate on the turbo. If that's stuck open it will dump whatever boost it has. I don't think there is one on that turbo... but check... What is really concerning to me is that the engine won't start without a shot of blow... with either a bad turbo or a governor coming apart it should probably still start and idle. You may find you have internal problems like a blown head gasket between a couple of cylinders. Just start with the simple stuff and work your way inwards... or keep good insurance on it.
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