Smoke!!

[mcamara]

Hi there,

I have an '83 300SD that just turned 200k. Over the past few weeks I have noticed that sometimes at red lights, it will start to smoke. When I pull away there is a cloud of smoke and then it's back to normal. Until two days ago.
I had stopped at a stop sign and noticed the cloud forming and wafting by and thought "here's my cloud again". I pulled away from the stop sign and sure enough, a cloud of white or light grey smoke. Very light color and it smells like burning oil. It did not go away and belched out a cloud of smoke the rest of the way home. Also seemed to lack power. I spoke with a mechanic that seems to know his MB's and he suggested that the tranny modulator valve had crapped out and it was burning ATF. I disconnected the hose going to the modulator and it appeared to be fixed. I then took it for a spin to Home Depot (about a mile) and it looked fine. Until I got to the HD parking lot. Monster cloud! Parked it for about 2hours waiting for a tow and finally got mad and drove it home. No cloud but smoky.
The point I'm trying to make is that it comes and goes. But when it is smoking, there is no way in hell that I could safely drive it.

Any ideas?