Smoke when opening the throttle after decelerating is often caused by worn valve guides and/or stem seals. This is cheaper and easier to fix than worn rings, pistons, and cylinders.

The "knocking" sound you heard and still hear faintly... could it be more accurately described as "ticking" or "tapping?" I'm assuming (someone correct me if I'm wrong) that the '87 has hydraulic lifters. If they are getting worn one or more could have leaked down while the car was sitting. This would cause a loud tapping for a few minutes. If the lifter is bad, the tapping may not ever completely disappear. If many of the lifters had leaked down the car would be difficult to start and would sound "funny" while you were cranking it with the starter. I think this is unlikely however in a car that has only sat for one week without running.

Don't overlook some simple things, too. If the car seems to be leaking oil from many places, check your PCV system. If the crankcase pressure is high, it will push oil past the seals and maybe even the valve cover gasket. It can also exacerbate marginal valve guides/stem seals. Smoke can also be caused by a failed transmission modulator, although the smoke tends to be whiter rather than blue and will be present even when the car is sitting and idling.

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1987 W201 190D