Pull the intake hose off the compressor side of the turbo and put your finger in there and spin it to see if the bearings are shot. If it wobbles, or just doesn't spin very well (or at all), the bearings are shot. Also, when you spin it, listen to see if its grinding anywhere, that could mean some form of foreign object damage. If either case is so, start diggin a hole, cuz that bad boy is dead. Time for a new turbo.
As far as the oil on the downpipe, Jimmy is probably right about the return line.
If your turbo checks out, buy yourself about 5 cases of beer, cuz you're gonna be under that thing for a while.
Before you throw a new turbo on, figure out what did the first one in though. Wouldn't wanna blow a new turbo up, too, then you'd need those 5 cases of beer.