68 Beetle blowing smoke

Hello,

I have owned my current bug since January 2007; it is my second. So, I am still getting to know it/all its little quirks.
It is a 68 that I had restored by the people that did my first one. It has a new engine, 1600 dual port, purchased from CA. I have put about 3,000 miles on it. We have kept up oil changes and maintenane.

The first real problem was that the engine was running-on after I turned it off. That was fixed when we discovered the end of the stem on the cut off switch attached to the carb had been cut off. That was replaced, then I started having other trouble.
I live in south texas, so the humidity has been hard on the engine. This summer I was having troubles that seemed resolved by lowering the carb. Float level and adding an electrical fuel pump. There were also some issues related to timing.
However, it has started blowing some white smoke when I first start the engine in the morning (since about late Aug/Sept). Today, it blew out a ton compared to the past and wasn't idling properly. The only work done recently was the valves. And, about a week ago I noticed a weird knocking type sound coming from the passenger rear when I slow down (assumed the brakes need adjusting).

My question is what could be causing the white smoke and could it all be related to an overheating problem? I have felt like it gets way hotter than it should, even for an air-cooled v-dub.
Also, could this indicate an even bigger problem?
J. Muir suggests an engine overhaul?