Blue up means to put some Prussian blue marking paste, as thin a layer as you can spread on one component face, and bring that face into contact with its corresponding mating face. The blue on one face will transfer to the other face and act as an indicator of how well the surfaces match. Any burrs or dings present will push the surfaces away from each other and only the high spots will get some blue transfered from the other face.
The drawbar is simply held in place by gravity and rests on top of the spindle if everything is in good condition. When you bring the quill up (the quill is the spindle carrier), the head of the drawbar protrudes from the top of the milling machine head and becomes accessible to the impact wrench socket. When you press the pneumatic drawbar button air pressure causes the impact wrench to move down, engage the drawbar head with the socket and rotate the drawbar to loosen or tighten the collet at the other end of the drawbar.
The drawbar is simply a screw that pulls the collet into the spindle. You are looking for any damage that would prevent the screw from tightening properly. This could be elongation of the drawbar, wear, misalignment of the impact wrench, leaking hoses or seals, worn out impact wrench motor, burrs, binding, low air pressure, lack of lubrication (drawbar threads periodically need graphite based lube), etc.
I have had two issues with mine: shearing dowel pins (I have a 2 piece press-fit drawbar) and over extended high speed/high rpm +Z move that pushed the drawbar into the impact wrench socket before the limit switch stopped the motion and resulted in a thrust bushing friction welding itself to the end of my spindle. That required removal of the spindle and regrind of the spindle end to correct, thankfully the taper was not affected by the rapidly loosening tool holder.