There should always be plenty of oil coming out of the exhaust, don't worry about that.

For the tuning, set it around half throttle or as high as it will run and then tune on the main needle. There should/will of coarse be reaction, it is just a matter of finding out in which direction to go, and how much to change. From your description it could be either too lean or too rich.

I agree with the earlier post. To save both time and money, talk to an RC club and they'll help you out. If your engine is new it needs extra care in beginning, in needs to be run-in well in order to perform well for a long time. It is quite possible to damage an engine during the first few runs which are the most important ones for an engines longlivity.