Hogfighter (Kevin) revived this old dormant thread at my request because my NL 6KW (Model M673L) generator started having almost the exact same problem two days ago: black smoke and severe loss of power. I checked easy stuff first:
cooling water strainer was clean;
raw water pump impeller was intact and rotated when the engine turned over (have had recurring problems with the nut holding the drive
gear on the pump shaft coming loose). Ran engine, same problem.
Changed
fuel filter. Ran engine and sprayed fuel all over because of
paint on the bleed screw washer. Cleaned off
paint, no more fuel leak but the engine still had no power and put out loads of black smoke. (This engine is equiped with a GenSep™ downstream of the
muffler to separate
cooling water from gaseous exhaust after it has been cooled. Water discharges below the water line, gas above. This device was sold to me so that I wouldn't bother neighbors in
anchorages with exhaust water splashing when running the engine.)
Consulted by
phone with my brother who is an excellent John Deere repair technician and knows
diesel engines inside and out. He suggested an air restriction but we ruled that out as I had recently replaced the filter element and there is nothing between it and the intake manifold. We essentially ruled out injector problems because the engine started easily and did not miss or run roughly. He did say that to isolate a malfunctioning cylinder, measure exhaust manifold temperatures - the malfunctioning cylinder will run colder than the rest.
Based on OP's original post and because black smoke came out both the gas exhaust and the water discharge, I suspected the exhaust mixing elbow. Sure enough, when I finally got it off, it was almost completely clogged. I scraped out as much carbon as I could with a screwdriver, soaked the elbow in 50% vinegar-water solution, rinsed it and let it dry.
Reassembled the engine and it ran under full load like a champ.

Lesson learned here: Run the engine heavily loaded more often to keep the carbon from building up.
(I must be really dense because that's the same lesson I learned the hard way with my main
propulsion engines:
Exhaust Mixing Elbow Inspections)