OK so after doing lots of research, I am even more confused!

Firstly from what I can see and understand you really need two catch cans, one on the breather line and one on the PCV line.

To keep it all legal and tree huggingly great, what is the correct way to setup both of the cans?

Are people using an in-line PCV valve or a specific can?

PCV valve remains in place. Get a speedflow fuel check valve and undo it and remove the spring (toads thanks hiddeous for that tip!) Put one can between the PCV and the manifold and put the check valve between the can and the manifold. There is already a plastic checkvalve on the stock system (as well as the PCV) but decent boost will blow the gizzards out. The second can put between the Pre-turbo intake and the rocker cover breather.

I thought the second was an engine air intake sucking air after the air filter. Does some air come out when on boost?

Just asking because mine is open to the air and just has a hose on it and no oil has ever come out.