Here's what I've learned per Saito's product manager at Horizon. If you don't know him, you should. He knows his products and is a terrific resource. This is an excerpt from his email, which he agreed Icould reproduce.
I suspect the cylinder that is producing the soot is your lower cylinder in the installation? Any time you run twin cylinders off a single carb there is always an imbalance. Saito has taken steps to even out the balance but it is the nature of the beast for one cylinder to run a little richer than the other. The steps they have taken work pretty well in a normal horizontal installation, but in your case the lower cylinder might be seeing additional fuel because of gravity.
Is my assumption correct about the cylinder with the soot?
So he is correct. I have my engine mounted vertically and the cylinder at the bottom is producing all the soot, oil, etc...
He also goes on to say:
Yes it will improve as the break-in proceeds and when you lean it out. It will always be there to some extent.
Thanks to everyone who helped. I'm satisfied with everyone's responses and will be flying this baby soon!!!
All the best,