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An intercooler or charge air cooler is essentially a radiator (heat exchanger) for the pressurized charge. Air will, as part of the laws of physics, heat up when compressed. It will heat up even more so than what the law states, as turbochargers are not 100% efficient; some of the input energy is wasted in heating the air that it compresses. You can find a lot more information about turbocharger efficiencies, etc. in the books that I have recommended on the links page, but suffice it to say that hot air coming out of the turbo is bad for performance as it is less dense than cooler air, and could cause pre-ignition and detonation. Hence the existence of the intercooler to cool down the charge before it enters the engine. This will allow you to run higher boost levels without detonation and achieve grater engine output. I recommend installing an intercooler when you fabricate your system to begin with, but would say it is almost a must at boost levels greater than 10 PSI. There are mainly two types: air-to-air and air to water. air-to-air has the cooling element exposed to an outside airflow stream (such as under the front bumper) while air-to-water has the elements enclosed in a tank that circulates liquid coolant through it. Air-to-water intercoolers are great for short duration use and will cool down the air during this short duration, but is greatly complicated and is useless once the coolant becomes the same temperature as the charge air running through the intercooler, thus necessitates a radiator for the coolant under extended use. This is why most OEM turbocharged, intercooled cars use air-to-air. Aftermarket intercoolers is another part that falls into the category of simple but extremely expensive, so I recommend you use one used from an OEM application that fits your spacing and positioning needs. It seems that the backyard turbo crowd are favor units that come from Isuzu, Nissan, Mitsubishi, SAAB, Volvo and some Ford vehicles. My opinion is that you stay away from intercoolers from Toyota and some Mazda vehicles, as they usually do not look very efficient from what I can tell by looking at them. Place your intercooler in a spot that is protected from road debris and bumps, but still gets ample amounts of airflow. Position it in front of the radiator if that is the general area in which you are mounting an intercooler, and give ample space or a heat shield in between the intercooler and the radiator, exhaust manifold or other sources of heat as to prevent heat transfer which could heat the pressurized charge. For a great resource on intercoolers including design, efficiency and fabrication/placement considerations for both air-to-air and air-to-water, pick up Maximum Boost by Corky Bell (see the links page).
Water injection is another method of detonation suppression while running high levels of boost. It involves using a pump and misting nozzle to spray a mist of water or water/methyl-alcohol (rubbing alcohol) mix from a reservoir tank into the intake air. The idea is that water absorbs a large amount of heat when changing states from liquid to gas in the combustion chamber during ignition. This system seems to work great for many people, allowing really high boost levels without detonation. However, it should not be applied as a quick-fix measure to an improperly tuned fuel or ignition curve, thus ensure you car is running great before using this system to increase boost. Here is a great site on building a low-budget, do-it-yourself water injection kit.
Turbos are designed to be most efficient at a certain flow rate and pressure. When boosting beyond this flow rate and pressure, the turbo begins to heat the air more and more making the charge less dense and more prone to cause detonation, offsetting any performance gains in increasing boost pressure. If you have reached the flow limit of your turbo and are looking for more power, you are going to have to look for a bigger turbo, or a hybrid turbo with a higher flowing compressor. The latter option is not a budget setup unless you know of a larger compressor that easily bolts to you turbine (I hear the larger compressor of a Ford Thunderbird Turbo bolts right onto my tiny IHI RHB5 turbo from a Mazda 626 that I plan to use on my Accord). If stepping up to a larger turbo, bear in mind that you may have to change the flanging on you manifold and downpipe to fit the turbo, along with other minor considerations in oil and coolant lines. Also, the low RPM performance will most certainly suffer, as the turbo will most likely take longer to spool, but its gains come in the higher boost available at the high end range.
You could make a custom intake manifold in much the same manner as an equal length exhaust manifold is made in order to tune the torque characteristics of the engine. long (12-18 inches), slender runners (around the same inner diameter as the stock manifold) would enhance low-end power, while short (6-8 inches), fat runners (bigger diameter than stock runners) would optimize high-end power. The commonly accepted (though simplistic) school of thought is to tune the manifold for low-end power and have the turbo worry about the high-end. The intake manifold could be made from fiberglass (in the same manner I mentioned for the plenum, just more complex), aluminum or steel (with some preformed, mandrel bent tubes). If there is an auxiliary plenum area where the manifold bolts to the carb, you could adjust the volume of this sub plenum to damper out intake pulses that could affect the carb's fuel metering ability. Generally, the larger the volume, the better for low RPM; the smaller, the better for high RPM. If in doubt, stick with the stock sub-plenum volume. Make sure your design distributes fuel evenly to all cylinders, any runners that make a sharp bend at the carb throat will receive less fuel than runners with straighter intersection, as would longer runners than shorter ones (they should all be equal length anyway) and runners with inlets that are farther away from the carb throat than others.
Under high boost conditions, you archaic points-and-condenser system will not cut it even though you have upgraded the ignition coil and wires. The problem is that under high boost, you need higher voltage/amperage to push the spark kernel across a denser charge. Upgrading the ignition system to supply this voltage soon exceeds what the points in your distributor can take, and will burn out the contact points. If you are running extreme amounts of boost, switch to an optical-trigger distributor system from a manufacturer such as Accel Ignition, or even as extreme as direct fire ignition kits (complete with module, coils cam/crank sensor, etc.) if you are willing to spend big money for a DFI setup.
The great thing about tuning performance cars is that it is a lifelong learning experience. My site has only served to get your feet wet in the wide world of turbocharged cars. For great sources of information to get you further into the journey of forced induction, see the links and other sources of information page.