Lots of questions here... has the gauge always read no more than 5 psi? Have you driven another Capri turbo for power comparison? My 3 xr2's are all different. The black 93 has best power, reads up to 8 psi on the gauge, turbo power spins up really fast, really snaps your head back in 2nd and 3rd gear. The red 91 gets to 7 psi slower, does not have the snap of the 93, runs great, not as good mpg as the 93. The white 91 only slowly gets to 5 psi, does not have the power of the 93, I have gotten smoke out the exhaust at times, gets to 5 psi eventually. I think the turbo needs rebuilding.
What I'm getting at is maybe the turbo has been weak all along, and the smoke is just indicating the seals are getting worse and more oil is being released into the engine.
Also, have you confirmed if there is moisture in that smoke? Any moisture dripping out the pipe at the same time? A small hole in the head gasket can let coolant into the engine, more at times than at other times. Very white could be steam, more darker probably not...Chris