It sounds like the missing “name in original script” might be the reason your application was returned. Since your name uses umlauts, it’s safer to fill that line exactly as shown on your Turkish passport, and also include a short letter explaining you haven’t lived in any country other than...
Hey Shima,
Yeah, once you get a new nationality, you’ll need to update your OCI. Since you didn’t have an Indian passport, just explain that in the form or attach a self-declaration — others have done the same.