Originally Posted by dabnis
"The new oil was very dark as well and smelled like self lighting charcoal"
An indication that raw fuel is getting into the crankcase? You mentioned earlier that it "breathes" 3 or 4 seconds after shut off, in or out? If there is oil in the intake manifold that could be an indication it is being sucked or pushed from the crankcase. Make sure the crankcase breather hose is free.
You might try disconnecting it the next time you start it. How long has it run since your last assembly. If not long, that is a lot of fuel going into the crankcase. An oil analysis would show how much, if any. I think there are two possible problems, oil getting into the cylinder or the injector pump. I would suspect the pump first. If a ring or rings were stuck it might be hard to start.
A compression test would probably show that. Proper oil level?
Been thinking about this a little more. First off, my diesel "hands on" experience has been with VW turbo and non turbo engines and a 3-71 Detroit two stroke diesel, aka "screaming Jimmy", in a commercial salmon troller. On the VW engines I replaced timing belts, changed injectors, glow plugs and set the injector timing with special tools and dial indicator gage, that is about it.
So, back to the drawing board:
1. The engine ran OK until you took it apart
2. From shop manual diagrams the injector pump/governor/ fuel distribution systems have lots of small parts, scary to even think about taking one apart
3. A number of possible problems already mentioned
1. Take the engine, less transmission, to a qualified shop
2. Explain everything that has taken place
3. Have them analyze it, compression test, oil analysis,inspect timing, dis-assemble and re-assemble if necessary
4. Have them do a "bench test run" while you watch
5. Re install and then go sailing