Wingaman: I think the key to not hydrolocking your gauge during the wet compression test is to put in a small, measured amount of oil, instead of a large, nonmeasured/radom quantity in. The A1 (Rabbit/Jetta, etc) Diesel Bentley manual as well as a genuine VW Diesel service troubleshooting guide actually both do say it is OK and one goes on to describe a specific quantity of oil to use. I have done the wet compression test before following these instructions (
http://www.vwdiesel.net/phpBB/viewtopic.php?t=406&postdays=0&postorder=asc&start=49) Although I didn't encounter any problems, I don't recommend the test due to the large volume displaced by the oil artificially increasing the compression numbers and making the results hard to make sense of. The results from a dry/wet leakdown test are much more useful.
I didn't do the test with oil into the cylinders. With a very low oil consuption (turbo is leaking) I think the problem is the head.
I found oil near the headgasket at cylinders 1 and 4. The bolts were maybe bad tightened.