I have had a similar problem.  I recently bought a standard line Bachmann 0-6-0 steam loco with smoke unit.  I ran it for some time before it produced smoke.  When it did, the smoke was heavy and erratic.  It also smelled heavily, making me think the smoke unit wasn't evaproating the smoke fluid very well.  After a short time, the smoke would stop, so I would add a couple of drops of smoke fluid.  (It seemed to go through smoke fluid much faster than my more expensive (BLI) locos.  After a total of about one hour of operation (two sessions of operation), I find that the smoke stack is leaning.  It looks like it is melting.  And the engine itself is covered with a coating of oil from the smoke fluid.  Has anyone else had an experience like this?  Is it worth trying to repair/replace the engine, or is this the way these less expensive units are going to operate?