The fluttering sound is probably due to the turbo stalling (not good)
Huh - how could the turbo stall with engine rpms at 3½k?

and I would check the dump valve (not sure of correct terminology on the mk 5) is operating properly under the increased boost pressure. I had a similar problem in my old LCR, when we were trying to set up the Forge split-R valve.
If the dump valve fitted is aftermarket then the problem will probably lie elsewhere.
Of course I might be completely wrong, but its worth a quick check. 
But the Mk5 don't use a "dump" valve (ie, one which vents excess boost to the atmosphere, which are well known to cause the turbo to rapidly drop off spool speed). The Mk5 use a recirculating valve, now correctly termed "cut-off valve", which would allow the turbo to spin at full speed, but simply divert excess boost back to the low pressure side of the turbo. On the standard GTI (KKK03

), this is done directly on the turbo housing, whereas on the Ed30/LCR/S3 KKK04 turbo with the remote "DV", the excess is sent back into the airbox - which I think the OP is still using. So like I said, the turbo itself shouldn't be stalling.
Maybe the actuall DV itself is fluttering, and over cycling?