If you take a look at the muffler you will likely see alot of discoloration from burnt fuel/oil. The smoke may be from that. As far as richening it or not - Let the motor warm up and then set the needle for peak RPM. Richen it until the RPM drops 200 - 300. That should get you real close. One thing to consider doing when setting the needle as described is to do so without much fuel in the tank, if you're not runing a regulator or pump. Reason for not having much fuel is that in a large tank, such as a 24 oz, the weight of the fuel supposedly tends to "push" the fuel but you loose that affect when the fuel burns off, possibly leaning the mixture.

As far as the fuel/oil - Use whatever your manual says. Seems like I recall it saying not use less than 18% oil and definitely not straight synthetic.

I know this wasn't part of your question, but you'll notice a jump in performance if you swap the prop for something else. You can get an NX 20x8 for $19.00 from AirWild Hobbies (no, I'm not affiliated in any way). It pulls and brakes well.

Dan