"Broken" muffler question.

This may be a stupid question, but well I want to be sure this is the root cause before I drop any cash on a new muffler (rather than take my chances with gas vapors and just weld it back together). I just bought a '88 TC and have noticed that the driver side muffler end cap has been partial torn off and hammered back into shape (on the input end). Now there is a slight gap extending halfway around the front of the muffler. The problems I've noticed is that there is a bad rattle whenever I take my foot off the gas pedal, but as soon as I put the pedal down even a slight bit the rattle goes away. Also I cant hit above 5psi boost. Would these symptoms be caused by this "broken" muffler? or are there more problems that I'm not thinking of? I still have alot of other things to go over before I even plan on getting it inspected, but I want to take care of this rattling problem first as it is very anonying.

Well I broke down and dropped the $80 for a new muffler, that solved one rattling problem...now I hear a completely different one, sounds like it coming from right around the turbo, at idle its a slight rattle, under load i dont hear it and again when I take my foot off the gas, its worst when i let off the gas over 2000rpm. I still cant get more than 4 or 5psi either. Could this be the wastegate? I'm going to pull the intercooler off today after work and give everything down there a through inspection, any input would be nice though.

Well I took a look inside, and there was some caked on oil in the compressor inlet and a couple little piles of thick sludge in the inlet hose. All the bolts seemed pretty tight as well as the actuator rod. Im going to try and get the turbo off this weekend when I have more time as it probably woul've taken me most of the night to get it off and then have no time to get it back on to get to work tomorrow.

On a separate note, I had the chance to check compression and the cylinders were all between 118-120. This seems pretty low to me, but well I'm no 2.3T expert just yet.