Smoking... dont think so...
If you are experiancing those symptoms. you have a problem there, smoking is usually caused by bad valve stem seals or bad rings... , as for the oil in the air filter... Really dont understnad how that works.
Oil in the water, yes.. thats cracked head gasket, but in the air filter ?
Also keen in mind, if you have a K&N or some sport filter, it is actually oiled from the factory...