Thanks for responding. This is a little long, but maybe someone might find it interesting.
There actually was a little bit of metal on my magnetic oil plug, but no more than usual. Dee built the short block 5,000 miles ago and it's been shedding metal onto the plug. He said this is normal because of how he built it. He honed the cylinders and said that you "want the rings fighting the cylinders." I've never built an engine before, but I think I know what he means.
I fixed the leak. I found this page:
how-to-make-turbo-lines-t254366.html
I also did some searching and found out that the front brake hose on a 86 Mustang V8 is M12X1.0 male inverted flare and 7/16-24 female inverted flare. Perfect size.
The guy who set this up used solid brake line. My theory is that the turbo manifold flexes and vibrates slightly which over the years caused the steel line to split leading to my leak.
My solution was to tighten the 90* fitting into the block so that it's parallel to the ground instead of vertical. I then screwed in the Mustang hose. The hose isn't long enough, so I made up the difference with steel brake line. My logic is that since it's only steel on one side this will allow it to vibrate and flex without cracking anything. In any case, I'm on vacation this week, money is tight, I want to drive my car, and I didn't want to wait for braided hose and fittings to arrive in the mail.
The brake hose is rated at 4000 PSI. Brake fluid is oil so it's rated for that. The whole thing cost me $16 to fix. As always I'll be watching my oil and temp gauges like a hawk. I can post an update later if anyone is curious.