Don't turn up the fuel screw until you get the timing right.
Retarded timing will cause white smoke, too advanced timing will give you black smoke. Remember advance is top of pump to pax side, retard is top of pump to drivers side, do not change timing when engine running, tighten all nuts before starting. 1/32" or pencil leads width is about 3* so 1/8" is about 12*, way to far at one time.
If it starts and runs really quiet I would suggest your timing is retarded slightly.
The following info was posted as a guide for retarded timing, remember do not move the injector pump engine running and always tighten the IP before starting.
The marks on the pump to housing are only accurate if it is the original pump from the factory. Your timing is a few degrees retarded. Turn the injection pump 1/16" to the passenger side (measured at the pump to housing flange) That's about 4 deg.
If you don't see white/blue smoke on acceleration your within 3 to 4 degrees retarded (white smoke = more than 4 retarded) low power, poor milage and prolonged starter engagement. If you see black smoke with heavy combustion noise, you are 4 or more deg too advanced. Glow plug damage can occure and mileage will suffer. You know you have it when it starts quickly and gets good milage.
If you want to see if the timing should be advanced you could hook up a 12v jumper to the timing advance when the engine is warm, if it idles better or runs stronger then you can do an advance 1/16", then try it again to see if more is required.