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Inside the carb there is a lever that pushes on the needle valve sealing it into the seat. (shutting off fuel flow) A diaphram actuates the other end of this lever. If the lever is not set right it could cause your problem.
The smoke and boggyness is not from too much oil, that would foul your plug. It is from too rich of a mixture probably. Check your mixture screws.
The built in fuel pump is capable of pumping many times the fuel that the motor can burn, so your return line will carry alot of fuel back to the tank. I routed mine back to the supply line.