Mine hasn't idled below 800 for as long as I can remember, (I have had it for 30 years) they all leave soot, and the gas smell you have is one of the reasons they get such horrible gas mileage, you could almost run another engine off the exhaust. To adjust the timing ignore the octane selector, the(the 1/2" bolt in the block with the little numbered scale attached to it.) the horizontal screw that is behind the distributor is what you need to loosen. It doesn't matter where the rotor is pointing when you are on #1 tdc as long as that is where the #1 wire comes out of and all the remaing wires go in the correct order. I had a W-1 on my truck for about a month, and went back to the rochester. I am not sure if I even had the right W-1 anyway. You don't have the distributor loose if it only goes one way, the distributor moves in the block for vacumn advance.So it will move some and then stop it should move ccw a bit, but return cw and stop, that is what the little vacuum diaphragn works on. The smoke is probably as stated, worn rings or most likely valves as mine did the same thing, it was bad enough no one would get near me, didn't have to worry about tailgaters I can assure you of that. It had set mostly for about 5 years and it took a couple of tanks of gas to get it to run right. and also as stated you could try adjusting the valves, and the compression/leakdown test. I don't know the exact intensity of the gas smell, but I think you are becoming acclimatized to the new modern engines, get behind any of the 50-70's cars and they stink. I have 71 mustang as well and it is the same way.
