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Cold metal parts have high clearances. As the engine warms up, the clearances shrink. If the blue smoke goes away after several minutes, then don't worry about it. However, you should de-carbonize the engine anyway when you get a chance.

I would stick with that engine until it starts pumping out blue smoke when it is under load. In the meantime, if I could find another Case 241 or 301 engine around, I would do a total rebuild on it so that I had it ready to swap in at a moments notice.
 

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If you are unfamiliar with the procedure, then I suggest that you go to Kohler.com and look at the Service Manual. We will have those manuals on this site shortly.

There are some products out there such as Sea Foam, Marvel Mystery Oil or Gunk that can be used to soften carbon and make it easier to remove. Do not use tools that will scratch the top of the piston. You need to inspect the underside of the valves. This is also an ideal time to adjust the valve lash.
 
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