1974 Johnson 35 smoke under the hood

I came into a old pontoon boat and moved the 1974 Johnson 35hp pusher motor over to my jon boat. After rewiring and a checking it over good, it started right up after 10 + years of sleep. This motor ran great all summer and still does. I noticed that when the cowel was off, exhaust smoke came up from the lower engine area behind the carburator. but I havn't been able to pin-point the location yet. Sometimes it looked to come out of the pivot pipe (for lack of better term). This is the the vertical pipe that joins the motor to the motor mount. I also noticed that when the cowel is off, the motor tach's up alot higher than when on.... and idles better too. Any thoughts on this will be appreciated.

Also, can this 35 be made into a 40 with carb updrade?

Re: 1974 Johnson 35 smoke under the hood

First year would be 76 for a 35, double check the model number. First thought would be the gasket under the powerhead called the "baffle gasket".