I have an md11c in a older Pearson. The engine is very reliable but is very noisy and vibrates a lot compared to the newer yanmars and others. Replacement parts are also expenseive in my opinion. Is your engine raw water or fresh water cooled? The water in the oil could be as simple as the seal between the raw water pump
and the shaft that drives the pump
. This is reported to be a chronic problem by other people that I have spoken to. I have changed the seal myself but have not seen any water in my oil.
As for the smoke that''s anybodys guess.
As for swapping out engines it would depend how long you intend to keep the boat and how much money you want to spend.
I plan to keep my engine until it dies and than I would swap to a yanmar myself.