I still feel that with the white/gray smoke that you have more of a chance of a water leak. If you can find a radiator pressure checker - not sure if they make a garage size any longer - put it in place, pump it up and keep an eye on it - also pull plug #1. Here's one on eBay; http://cgi.ebay.com/ebaymotors/MAC-T...mZ250277411365

A compression check wont always find a water leak.

Another check to make is a compression "leak down test". Here's a description of an inexpensive test method: http://www.geocities.com/dsmgrrrl/FAQs/leakdown.htm or here http://www.wcengineering.com/articles/leakdown.html