In neutral (no load) engine will move through rev range up to approx 3200 rpm as expected ~ clear exhaust with only a bit of black when very close to WOT (upwards of approx 2800rpm)
Once gear is engaged (fwd or reverse) engine will operate normally at idle speed (approx 6-700 rpm) then accelerate typically (clear exhaust and prop/boat speed) up until approx 1100 rpm after which point much black smoke is noticeable and black ‘gunge’ is in the exhaust and floating on the water (appears to me be improperly combusted diesel).
There is still throttle left but as you accelerate further there is no increase in prop speed/boat speed or rpm increase, just more black smoke/’gunge’.
>>>>>>> I have checked valve clearance and found No.3 cylender to be out by 0.1mm[ should be at 0.3mm but was found to be at 0.4mm (I have not had a chance to tune and check as was beaten by the light)] but will do so in the morning. Could be causing this issue?
Assuming you correctly reset the fuel timing
of the injector pump ....... IF not, FIRST recheck/reset FUEL INJECTOR TIMING. Then if not corrected:
A. Do compression test or pressurized air-leak-down test looking for partly blown head gasket (possibly between cylinders).
a 'floating' / hanging-up valve stem that isnt fully withdrawing from the combustion chamber thus the valve not fully closing and not allowing a cylinder to develop full compression due to valve leakage.
Could be as simple as rust on a valve stem that is 'slowing' the spring return action of the valve - causing the 'float' at high rpm under load.
B. Remove the injectors, looking for sooted injector tip(s), the one with the 'blackest' tip will indicate which cylinder is not reaching full compression. If so, then measure the 'stroke' dimension (to closest 1/1000th of inch, etc.) of the valve travel distance for that cylinder. If rusted valve stem, sometimes soaking the valve stem seal(s) with a bit of 'penetration oil' will help to re-polish a stem that is not working (hanging-up) correctly. Also look for camshaft lobe that has abnormal wear.
C. If there is a high probability of head gasket leak and the exhaust gas is leaking into the fresh water cooling circuit ... there are dyes that can be put into the fresh water and which will 'fluoresce' when 'black light' is shown into the water and the water has a high amount of carbon monoxide from a head gasket leak.
D. If the engine has ever had water in a cylinder - Another possibility is a hanging up piston ring with the possibility that the ring groove is rusted or filled with soot and the ring is not fully following/expanding .... in a worn cylinder bore that has developed a 'taper'. A rusted piston groove would be an indication of water leak into the combustion chamber, either from a blown head gasket OR an exhaust manifold that has developed a pin-hole leak from the 'water side' to the 'gas side' (water enters the cylinder after
the engine is shut down ..... in such cases of water leak, the removed injector tip will be the 'easiest cleanest' but sooted and the soot 'easily' wipes off, continuously cleaned by the steam generated but sooted due to the low compression in that combustion chamber due to 'sticking' piston ring.
Remedy for crudded up piston ring groove .... remove all injectors, inject penetrating oil into suspected
cylinder, let soak for several days, then spin engine by starter, let soak a few more days ..... and repeat a few times followed by running engine slowly from low rpm/no load and
'slowly' from previous to high rpm/full load .... over several hours - to repolish piston ring groove, ........ then look for source of water leak into the combustion chamber that probably caused this - head gasket or leaking exhaust manifold, etc.
good luck, hope this helps.
added/edit ... an engine with a stuck/sticking piston ring will usually have a lot of 'blow by', as noted by a lot of 'gas' coming out the 'block breather' or removed lube oil cap.