The flutter could be caused by a couple of things.
1) Lop-sided pressure.
2) Un-proper valve seating in the intake (forcing the exhaust back through the intake valve during hard acceleration).
3) Exhaust leak or pipe leaking or bad gaskets.
4) Bad lubrication in the turbo.
5) Blow-by (bad piston ring seal in one or more pistons)
Thats all that I can think of. It may be just the turbo, however, it could be numerous problems with the engine itself and since there isn't another turbo mounted to compare it to, its hard just to tell with such little description. If you have heard it run, is there anything that sounds like a bolt somewhere in the block (that would signify a detonated piston which is common with forced intake systems). Also i've heard but don't know for sure, that if you don't have enough backpressure in the exhaust system that it won't properly turn the turbo over. Since it "runs fine at low rpm" its probably because there isn't enough pressure to make bad piston rings, exhausts leaks noticeable. I hope that this helps.
Also, in my town, I could by a TH350 for around 300 dollars. As for clearence I'd recommend talking to TurboMeister, he seems to have a lot of experience with turbo clearence and such.
Tyson