Thanks GGG, I don't have another ps1 so I may wait until after the Hampton show this weekend. I may find a reasonable priced "donor" engine there. If so, then I'll swap parts to isolate the issue. Although I'm hesitant to install another PS1, I also thought about sending it to you and have you fix it. Unfortunately I have the smaller K-line cars which are really o27 sized, so I may just get a RK version PS3 w/o smoke and be done with it and sell the B unit I have to recoup some money. Put the A unit on the shelf for later.
As always, many thanks your help.