This is how I resolved my friend's 81 300SD blowing lot of white smoke. Disclaimer - I am not a mechanic by training. It may not apply to your smoking problem but you can take it into consideration. This is how I arrived at the turbo problem after my elimination methods.

1) The car runs on WVO but it starts every times so I discounted the rings. I did NOT do a compression test. I would have done it if I have the tools, I don't. Also it is more difficult to do compare with a gas engine.

2) I drained all the coolant when the car is cold. Started the car ran it for a SHORTWHIILE until the engine get hot. It still smoked a lot without coolant. Car was not losing coolant at all, so I discounted head gasket. Also my friend said he did a radiator pressure tested and found no leak. Do this at your own peril.

3) Smoking is continuous at idle. Not at startup in the morning after car is sitting for a long time. So I discounted the valve seals or guides.

4) Adjusted all valves and it still smoked.

5) Suspected very strongly is the turbo seal leaking oil. Changed out turbo and problem solved.

This is my experience and hope this info helps to resolve your smoking issue.

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Not MBZ nor A/C trained professional but a die-hard DIY and green engineer. Use the info at your own peril. Picked up 2 Infractions because of disagreements. NOW reversed.

W124 Keyless remote, PM for details. http://www.peachparts.com/shopforum/mercedes-used-parts-sale-wanted/334620-fs-w124-chasis-keyless-remote-%2450-shipped.html

1 X 2006 CDI
1 x 87 300SDL
1 x 87 300D
1 x 87 300TDT wagon
1 x 83 300D
1 x 84 190D ( 5 sp ) - All R134 converted + keyless entry.

Remove the Injector and have it tested or move that Injector to another Cylinder that you know is good.
Do what you said above ounce it is on the good Cylinder. If it does the same as you wrote above you have a bad Injector.

The Marvel Mystrey Oil soak worked for me and cured the Gray Smoke I had just about all of the time. (The Car had sat 1 year and when I did get it going I drove 6 months with a Thermostat that was opening too soon.)

But, it takes time. I soaked 1 week, rotated the Engine (with Glow Plugs removed) and soaked another 3 days.
Cranked the Engine to avoid a hydraulic lock and blow out any excess oil and installed the Glow Plugs and started.
Drove the Car to my Drive Way and changed the Oil.
Then took the Car for a hard drive on the Freeway.

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84 300D, 82 Volvo 244Gl Diesel

Much gratitude for all the helpful comments and information. A few other details:

The IP was timed with the old timing chain in place.
The valves were adjusted then.
Then rolled in the new chain.
Then put in the injector nozzles. They were balanced using the ************** pop tester. BTW, one old injector dribbled fuel and erratically sprayed, sometimes releasing at 1500 psi, other times at 2700 psi. All rebuilt injectors did not leak, had good spray patterns, and were balanced. I thought the knock would go away, but it did not. Definitely got better.
The turbo shaft does not have play in it.

From the suggestions from the forum, I will:

Recheck valve clearances (doubt this is the culprit)
Recheck IP start of fuel delivery (doubt this too)
Replace valve stems seals (the smokey exhaust is really, really bad on startup, and becomes just really bad when warm)
Re-examine the vacuum system for leaks.

Once again thank you for all the information.
I will post the outcome of this when completed.
Will

Regardless of what other diagnostics you do, run a leak down test before you decide that the engine is trashed. You want a definite diagnosis, not a guess or supposition. If the car is good, replace the engine if it is in fact bad.

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85SD 240K & stopped counting painted, putting bac together. 84SD 180,000. sold to a neighbor and member here but I forget his handle. The 84 is much improved from when I had it. 85TD beginning to repair to DD status. Lots of stuff to do.

Here's the thing. If everything you say has been done then you shouldnt have a problem. Considering everything that has been rebuilt and the good compression you shouldn't be smoking. One thing that comes to mind might be a leaking fuel return line. Air intrusion there could cause some smoke.

I still think that you should be cracking the injectors separately while the car is running to determine if the smoke is coming from one cylinder or possibly all of the cylinders. This is such a simple thing to do and can tell you a lot. At that point you can start chasing the right things.

Please report the results after you do the test!!! We can figure out the problem, but you should start simple in order to not overlook things and to keep moving in the right direction!!!!

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1998 E320 150,000
1980 300SD 240,000
1965 190D 79,000

I have posted some Youtube videos of the car running before and after the Monark injector nozzle replacement. They can be found at:

Before (listen for the knock when first driving)

http://www.youtube.com/watch?v=KsIyTkrX1As

After
http://www.youtube.com/watch?v=x_U5Sd69MIc

The nozzle replacement made the car sound and perform better: better idle, smoother acceleration, and more power. The old injectors released at 1600 psi (as opposed to close to 2000 for new ones), and one was erratic releasing arbitrarily between 1300 and 2600 psi. It also dribbled. I was surprised the knock when cold remained.

Will

With how hard the car was to start in your after video you're compression numbers are a bit surprising, especially when you went to restart it and it still didn't want to start. You either have really bad blow by that is giving you false compression numbers, you need some new glow plugs, or your timing is way off. With comp numbers in the 300's you shouldn't have to try to start the car 3 times. It should fire right up, unless your glow plugs are bad or timing is off. Bad glow plugs can cause more smoking on start up due to the fuel not being burned completely. It looks sunny in your video, and it appears your not wearing a big coat which tells me that you are somewhere fairly warm which makes me thing your GPs aren't the issue. When you did the compression test did you turn the engine over several times with the injectors out to blow out any fluid in the cylinders?

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The hard start after the replacement was caused by air in the fuel system. The car starts without hesitation now. Here in Southern California it does not get too cold. We did have a cold spell where the ambient temperature was about 45 degrees and the car started just fine.

Will