Hesitates after 7lbs...

[Halon]

There, was that so hard? You need to provide as much info as possible when you're having others trying to diagnose your problem over the internet.

So with your wastegate unhooked, you're seeing a max boost of 7psi by 3.5k rpm's, and it never goes above that? Assuming your gauge is installed correctly and reading correctly, I'd say you either have a MAJOR boost leak, or the problem is pointing to your turbo/wastegate.