If he "adjusted" the IP timing, he most likely screwed it up...as mentioned above, the W210 E300 has an electronically adjusted IP. Your IP now injects either too early or too late, causing incomplete combustion and the production of the smoke you see.

Get it looked at right away, because if it's injecting too early you could be seeing some detonation. The silver dollar sized O-ring was probably the shutoff valve O-ring. If you're cabable of removing the intake (~20 min once you've done it, hardest part is putting it back on), you should be able to replace the O-ring yourself.

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99 E300 TD -- sold
01 540i 6 spd