
Kirsty's on the right track i reckon... The smoke could be down to a failed EGR valve, the oil usage could well be an unrelated leak that is being soaked up by the sound suppressent material on the plastic engine tray.
I wouldn't bother rebuilding the block if it's shot, i'd replace the block with a proven bottom end (perhaps from a ford ranger if more readily available) Then i'd re-skim the block face, have the new head pressure tested (£40? as a precation) then re-assemble.