rebuilt 300D not running right, odd noise

[Larry Delor]

Hello folks!

I recently purchased a rebuilt engine for my 300D. The mechanic who installed it is not a diesel expert, but I believe in his mechanic skills. Seems we have run into a snag.
He called me up the other day to tell me he had it running, (he had taken quite some time getting the injection timing right), but, he said that it ran rough, especially cold.
Here is what I observed:

*The engine starts, but runs very rough-it even stalls a few times, but will start back up.
*When increasing the throttle to high rpm's it runs very smooth and even.
*When at idle (after a few minutes of warming up), there is an odd noise that has me wondering what it is...I can hear it distinctly through the air cleaner...it sounds as though one of the cylinders is going the wrong way... like someone banging on the bottom of a coffee can with a wrench (in regular intervals).
*There is a lot of grey/blue smoke.

I was thinking valve timing, but then wondered if that wouldn't cause bent valves. I don't know if the injection timing being off would cause these symptoms.

Any comments/suggestions are welcome