First of all I want to thank everyone for their input...Here is what I have done...I got into the 1666 and removed the shell and removed the smoke unit housing by un-bending the two tabs that hold it in place. Marx made these so no kid could work on them, there are about seven places where the two halves are staked together. Opened up the housing after removing the bellows flapper. Now you can see how the air is channeled through a small area running up the length of the stack to the top, the cap then channels the air into the chamber and pushes any smoke out of the stack. I put a little angel hair in the form of a rope around the element, figured this way it could hold a little more fluid. Fitted the two halves back together and attached 4 4-40 screws with nuts, success, no air leaks. Put all pieces back together. On the bench there is a good amount of smoke but on the layout with the train moving, it is somewhat hard to notice the smoke output. Question: Does it smoke, yes...Could the unit been designed better, yes. Don't see anyway to make it better so will just live with it...
Marty