It is a valve that feeds into the fuel return line from the injection pump. The internal spring and ball open at a preset pressure to keep the supply fuel pressure regulated in the injection pump.

With age the spring can get tired or crud can build up keeping it open. Ideal retained fuel pressure is 15-19 pounds by it. By design there should be enough fuel pressure supplied to enable it to overflow into the return line. It can be reconditioned instead of replaced by the owner if needed with the exception of the sealed later versions of it.

What I am feeling is to make sure you have decent fuel pressure. This based on the unusual fluxuations seen on the millivolt readings.. The exhaust smell could easily be some cylinders or all for whatever reason firing late.

Some of your readings indicated and should be double checked that you have unbalanced power strokes. Some readings also indicated they were okay at times. At least the valve clearances are out of the picture. Still something is going on.

Timing the number one element or at least checking it with the drip method should be attempted. I wonder what the fuel milage has been if known on that car?