Do NOT use Rotella (diesel grade) oil in your engine!! Use standard HD oil used in gasoline engines.
Check the water output at operating rpm, just collect the ouput in a bucket .... it should be 3 gallons per minute, if less check for a blockage: piece of impeller that migrated in the cooling loop, salt fouled block (raw water cooled), large pieces of rust (platelets) inside the
exhaust manifold - all easily fixed.
If raw (salt or brackish) water cooled, the correct thermostat is 145 degrees. If fresh water cooled, 180 degrees. DO NOT run this engine without a thermostat installed ... as it is a bypass thermostat system. With the thermostat removed the cooling water will entirely bypass the engine block. .....
There are many situations (most minor) that will cause an A4 to smoke a little. Most can be solved by removing the old crankcase oil, replacing with Marvel Mystery Oil, running till warm WITH NO LOAD with the engine (in neutral), then shut down, put a few tablespoons full down the (cleaned) sparkplug holes, crank with the starter with the spark cable to the coil off/removed so that the engine cannot start ... and let sit a week or more. Will clear a lot of carbon fouling of the piston rings, etc. If the piston oil control, etc. rings are stuck with carbon debris, the engine will smoke, etc.; the MMO will help to clear the build-up (and you might even notice better compression!!!). Then drain the MMO, replace with regular oil (good to use 1/4 MMO + 3/4 regular oil in the crankcase)
If you need additional help ... join the Atomic-4 eMail discussion group on the Sailnet message boards. Don Moyer sells a comprehensive (best one ever written) Maintenance and Repair Manual for the Atomic-4 @ www.moyermarine.com ...
good luck. Hope this helps.