My mechanic resolved the smoke problem by (i) replacing the PCV on the LH rocker cover breather hose and (ii) instaling oil traps. The oil traps are essentially small pieces of mesh that catch the oil inside the rocker cover and allows air only thru the breather hose. The oil accumulates on the mesh and drips back into the rocker rather than going into the breather hose. They are standard on old Fiats and Alphas. I am happy with the result at a relatively modest A$240 (US$160). My mechanic is Rob at Monza Repairs in North Road Oakleigh Melbourne Australia (03) 9576 9341. I can recommend him for anyone in Melbourne Australia with a classic auto (merc or otherwise).

Cheers

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Joe