617.952 Strange Valve Timing Issues

[R Leo]

We're trying to get Passion Flower ('85 300TD...mucho miles) back on the road and not having a good go of it.

Symptoms:

Engine fires off easily but has a horribly rough idle and won't idle reliably at all until it warms up some.
Even after warm, engine idles rough and responds poorly to throttle.
Plenty of bluish-white smoke. Smoke doesn't smell strongly of diesel or burning oil.

What's been done:

• Valves adjusted - none were more than .002" off despite going at least 30k w/o an adjustment
  
• Ran straight Stanadyne cleaner through fuel system - no change
  
• Injectors pulled and tested - OK
  
• Priming pump was leaking badly - replaced with used but non-leaking pump. Interestingly enough, the thing fired up and ran fairly smoothly for at least 5 minutes. After that, it went back to smoking and rough idle.
  
• Checked valve timing and chain elongation (and here's where it gets weird weird) - going by the rough timing method (aligning the assembly mark on the cam and the pointer on the crank) nothing is even close to lining up!!! When the cam mark is aligned, the crank mark is at least 30° to 60° off. I get pretty much the same results when using the dial indicator and 2mm of lift. Also, the slack side of the timing chain is exactly that - slack. I mean you can grab it and move the chain. I'm pretty sure that isn't right.

What the hell is going on with this thing? It seems likely that it's jumped time but it sure doesn't seem like the timing could be this far off and 1) still run or 2) not have bashed it's valves into oblivion. Any other ideas?