If you haven't done so already, I suggest that you try running the engine with the new air filter removed, in case it is the filter that is causing the rich mixture problem. Also, check once again that the choke is fully open when it is smoking.
I can assure you that the black smoke is not caused by a design fault. I dislike those old Kirby-Lausons, but they were not ludicrously bad: there is no way they blew black smoke when running unloaded. My criticism of them is that they are not as nice as a Briggs or Honda, but they are very reliable and extremely durable. You have a serious carburetor malfunction, and it will damage the engine if you run it that way.
