At the risk of entering the debate so late I'm going to dive in now.
I have a 31year old YSM8R which I know couldn't be more different from your engine.
However the symptoms are almost identical. Black soot in the exhaust flow and lack/loss of power. On my naturally aspirated engine I wasn't getting any rise in the oil level that I could see but the oil was, after a change, almost instantly black as night.
I built a compression
tester by using an old disassembled injector(no guts) with a shrader valve threaded into the top. I used a Northern Tool cheapo diesel compression tester($49) and got an incredibly low 185psi. I checked it 3 times just in case I had screwed something up somewhere. As most diesels are supposed to run between 400 and 600 psi I knew this couldnt be good even if I was wrong by 100%.
I decided on a rebuild.
I replaced the cylinder sleeve, piston and rings, wrist pin and bushing, main bearings, valves, valve seats and guides. When I first pulled the head I checked for valve sealing by removing the rocker assy and closing the valves and pouring fuel down the intake and the exhaust ports
. Fuel ran out around the exhaust valve but not the intake valve. I assumed(confirmed by the head rebuilder)that the exhaust valve and seat were burned.
I know my methods are a bit primative by they DID work and showed me where to look. The fact that paid mechanics($70+perhour) don't have proper tooling makes me think I'm in the wrong business.
My suspicion is you have an engine that has reached its best before date and is in need of rebuilding. I spent the $700 for parts and head rebuilder labour happily after finding out the cost of a new motor
I had bought a used engine(YSM12R) for $875 that I was told (yup by an "expert") that it was exactly the same footprint and would bolt right. It wasn't even close and I ended up selling it to a guy from California
. He is still using it.
Before plopping down such a huge amount for a new engine look around for a good used motor. Yours is not uncommon. I found the one I bought on Ebay. If not that then get it rebuilt. The amount these guys charge for installation
is, IMHO, next door to thievery. I do all my own work. Not because I like to do it but because I'm to poor to afford to have someone else do it for me.
It has been my experience working around(not repairing) various diesels from big trucks and heavy equipment
to large generators and small marine
engines that unless stuff is hanging out the side and making scarey noises they are easily and fairly cheaply rebuilt and good for many more years of service
I know this bad timing is making a much anticipated trip into a bit of a nightmare but take a few days off if you can and come back with a fresh mind.
Remember my story.
I spent 2 years building or rebuilding various bits of my small old boat only to have it tossed into a swampy hole by hurricane
IKE less than 2 months ahead of my departure date for a planned 6mo cruise
. I fixed the (3) nasty holes in her hull
and put her back in the water(by hand, but with lots of help) and then brought her home for another year of fixing, including the much needed engine rebuild.
Had I gone on that cruise
with the engine as it was I can picture my boat as yours is right now. Maybe this minor(although right now feels major) set back is for the better.
Hang in there, DON'T get discouraged or give up and you'll see, it'll all work out for the better..................m