I don't think it's water. Put 16lbs on the system for 4 1/2 hours with no loss of pressure. I'm kind of at a loss as to what to try/test next! I hate to pull the heads and have them rebuilt if it's something simple.
Has the oil level gone down at all? If the coolant system is holding pressure like you indicated, I would think that the smoke is being caused by oil. Put some miles on it and check the oil again.
Wayne
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Don't get caught dead, sitting on your seat belt.
you may be leaking coolent around the head bolts if they were not sealed properly during assembly. You might try retorqueing the head bolts, that can be a problem on those 5 ltr. engines.