I used to own and play around with 80's Saab 900 turbos, so I guess they are my reference point when thinking about turbo anything. Specs were as follows:
2.0L 16 valve turbocharged/intercooled 4 cylinder with 8.5:1 CR, approx. max boost 7.5 psi, Bosch LH ignition/injection.
claimed 160HP, 175lb/ft. of torque.
They had this system called "APC" which amounted to a computer/solenoid controlled wastegate that dumped turbo pressure when knock was sensed. The general consensus amongst Saab nerds was that the system was too conservative and prematurely bled boost pressure. We used to adjust the linkage on the wastegate until boost pressure got high enough that APC would instigate fuel cutoff under hard acceleration, then turn it back a bit.. usually wound up around 10 psi max using premium pump fuel.
These engines were EXTREMELY reliable. The rest of the car would fall apart around it while the engine kept on ticking. Like the M42, Saab's 16v used forged internals, timing chains, hydraulic lifters, and sodium filled exhaust valves. I think the Saab intercooler and APC system could be adapted to work with an M42. I don't see how turbo location could be contributing to the "smoke" as most automotive turbo setups sit below the head/s.
I wager that even at 6:1 CR, 22 psi of boost is going to be excessive with any pump gas especially considering you haven't mentioned an intercooler or knock sensor setup. I think your 6:1 M42 (intercooled) could manage 190hp & 190lb/ft @ 15 psi & premium pump gas. I'm thinking the low CR is going to give you some pretty mean turbo lag.
