ATF smoke is white, the blue color fuel is normal coming from the filter. There is supposed to be fuel in the prefilter, but as far as I know they are not completly filled with fuel, or at least it's that way on my car.

One thing I would recomend not doing is cleaning the injectors with ATF. Spend the money and get some Lubro Moly Diesel Purge, this stuff works great. I would also not recomend dumping back the old fuel from the old filter back into the fuel tank.