I don't know what I did different in my Caddy Mk1 but is was also a Frankenstein engine with a 1.6 engineblock, 1.6 headgasket (Victor Reinz) 1.9 cylinderhead.
It was smoking for a couple of seconds than it was ok, the parts that I used were worn and the engine broke. I sold the Caddy with an 1600 N/A.
I bought a rabbit and now I'm building up a 1.6td engineblock with a new 1.9 cilinderhead and a fuelpump with 10mm plunger and 1900TD camplate, new 1600 GTD nozzles with 170bar opening pressure, KKK K24, Custom intake
I got the engineblock back from my uncle with new bearings, pistons. I'm now working on the fuelpump.
Next step is the cilinderhead. I can keep you posted on my experiences with the 1.6 / 1.9 combo.