Originally Posted by Bacon117
Turbo is shot, no question. The turbine is hitting the housing. If you take off the intake from the turbo, you should see some gouges in the housing. This has the potential to ruin your engine, so replace it ASAP. However, I did drive my 02 like that for about a year, no terribly ill effects. (I'm sure I'll see some effect when I rebuild it...)
Just keep in mind that as it wears, the metal flakes are going into the engine since it's post air filter...
After you replace it, make sure the WG and BPV are working properly. Mine weren't, which I believe exacerbated the issue, by causing undue stress on the turbo.
Are you sure? I feel like it doesn't seem shot. I might have it inspected by Subaru just to get an idea of what's going on.