Yeah, the oil is totally normal and nothing to worry about. The VW engineers even listed it as a good thing in their SAE paper on these engines - it adds lubrication for the valves, decreasing valve seat wear.
Smoke - what colour, and what situation? Before the turbo spins up? After it's going?
There isn't really a 'factory' setting with the smoke screw. There's the setting a guy with a pump test bench will set it to, but that's highly dependent on the individual pump. The collar on the screw is there to prevent you from cranking it in too much, but it isn't the "right" place for things to be set. On my car if I bottom out the collar I'm leaving huge soot clouds behind me.
Try backing the screw out a tad and see if it improves things. Like 1/8 of a turn at a time, tops...