Does the white smoke evaporate quickly once it is expelled? What does the smoke smell like? Does the water tank pressurize quickly at startup, or does it bubble? If it has any hint of anitfreezed smell out the exahust or the cooling system quickly pressurizes upon startup, then it is highly likely the head gasket is bad, and this would account for the lack of power. My 1.5 caddy did this some and it didn't have much power either. I found that several head bolts were loose. Some who repair vws, don't follow the protocol of retightening the head 10 min. after warmup, then again @ 1000 miles. I don't think the mechanic that repaired my 1.5 with the previous owner followed this protocol since the head bolts were loose. You could check the head bolts for torque to see if any are loose, and this would help to narrow down your problem.
I could be fuel related as the others have stated.
If not, it may be a head gasket or even a ring problem.
The rings could be bad if the previous owner really overheated the motor. Overheating lessens the tension of the rings, and they won't seal like they should if they get hot enough. Also, the pistons/rings may have scored the cylinders and this would create a lot of blow-by, again reducing compression and bad combustion.
Also, if one or more cylinders have a broken ring from overheating, then this could be a problem also. It would be interesting to see what kind of compression you have in each cylinder. This would give you an idea whether or not compression/combustion is an issue.
It may not be any of these more major problems, but these are possibilties.
Greg