Definitely unburnt atomized fuel from your description.

Maybe the IP was installed out of phase.
Surprisingly these engines can run, albeit poorly, when the IP is timed to the wrong compression event (exhaust instead of intake).

__________________
78 W116 300SD 'Desert Rose' new as of 01/26/2014
79 W116 300SD 'Stormcloud' RIP 04/11/2022

Remember : you're running a long dormant engine in a test stand .

Button it up and re install it, once you're able to drive the darn thing you may well discover the smoke clears op after some road driving .

__________________
-Nate
1982 240D 408,XXX miles
Ignorance is the mother of suspicion and fear is the father

I did then what I knew how to do ~ now that I know better I do better

I ran it for 20mins yesterday in the driveway (with water connected), but no change. Neighbors thought that I was doing the Corona fumigation .

__________________
1974 MB W115 240D

I double checked it that i was on compression stroke... Will check again this afternoon when i fire it up.

__________________
1974 MB W115 240D