Whilst I don't know about HDIs specifically, that sounds nothing like a failed turbo to me. I'd say it's more likely a pipe has popped off somewhere 'twixt turbo and engine somewhere, either that or it's split.
Did a variant of this engine have a bit of a reputation for splitting turbo pipes?
Turbo failure always (almost) means shot bearings = chewed oil seals = oil pouring down the exhaust pipe. So if it's now using loads of oil - sorry mate the turbo's probably gone.
If not:
How does the waste gate operate? Could all the exhaust gas be by-passing the turbo.
It's worth checking all the pipery from the turbo to the inlet manifold just to make sure a joint hasn't blown off (clip not done up last time?). Then check that inter-cooler (is there one?) hasn't got a hole in it (corrosion or something through the grill?).
Here's hoping it's simple and cheap
2012 Subaru Forester - capable but no magic carpet
2011 Grand C4 Picasso VTR+ 1.6HDi - not missed!
1995 Xantia Estate SX 1.9TD in Vert Vega "The Green Lady" - sadly missed
1998 Xantia 2.1 VXD Estate in Mauritius Blue - R.I.P. (terminal tin-worm)
Same thing happened to my trany, made a very slight graunchy sound at high revs for a few minutes then the turbo siezed solid, turned out that the oil feed filter cartridge (like the ones you get pushed into the mating surface of the head on XU's for the valve gear) blocked, this starved the turbo and they dont last two minutes without oil, it done the same thing too, with no boost and a solid turbine restricting the exhaust it overfueled like mad belching thich black smoke and not having enough power to do over 20mph tops made getting to work fun.