I would warm the engine up and use a non-contact temperature probe to look for hot spots. Likely problem areas are front of the head. The water passages can rust shut there and need serious cleaning. I would find the water level and look for problems there as that is where the rust line is. Water drains back through the water pump until the level in the engine and ocean are equalized. Not a problem if the water inlet valve is turned off when the engine is shut off.
Search for previous posts on this engine to describe some of the issues. Not a bad engine but parts are outrageously expensive and difficult to get. If it works well it should last many more years but I would check it out closely.
Water pumps are problematic and can leak water into the oil. Not a problem if maintained properly or if the newer designed pump is installed.
Be sure you can do a cold start. Engine off for at least a day. If it starts easily that is a good sign. Otherwise compression should be checked.
Shouldn't smoke, much anyway. It's an old engine so you would expect some wear.
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Currently in Long Beach, CA