Mine did the same thing, so much that I called it "Old Smokey". Mine stopped smoking after running it for a while. I ran it at idle with one quart of oil replaced by something like kerosene or diesel. Just up on blocks in gear for an hour or two (total). This was while I was flushing the rust out of the block, and had changed the gear and diff oil. No need to race it. Then changed the oil in everything, and adjusted the carb and tappets, blah, blah, blah.
My rings loosened up, and its not "Old Smokey" anymore.
Worth a shot...
