I bought that engine and am also having problems
I had not noticed the chuff item because the sound cuts out on my engine but I think you are right on the chuff issue as well. I was thinking the sound issue was something with the tender not having enough weight - I noticed my tender has a little wobble to it.
The smoke unit appears to be synched with the chuff on low speeds - that is when I can hear it.
I tried without smoke, engine resets, different tracks. After reading your post I up the chuff count but still have sound cutting off.