Just to elaborate a bit on what grumpy suggested, a tea spoon of 2 stroke oil rather than engine oil.
As far as the blades go, you got the ones for a later model, a power torque which has the oval shaped disc.
The full crank utilites had their own disc with a blade that was about half an inch longer than the rear catcher models.
You could try and find a 'turbo thrust' disc, i believe that this is the only one that will work on your mower with the blades you bought. Power torque disc will not swing past the handle mount bolts.
First try pulling the back off the carb and checking that when you move the throttle lever that the grey plastic thing in the carb is getting its full range of movement.
This might be part of the full revs and low power.
The module for the ignition could be no good as well. It could just have a bad earth, corrosion and what not over the years.
If you dont have spares im not sure how you would check this. A new ignition module is nearly $30.
If you are sure the carb is right then check the compression. This wont be much to do with low revs, mostly its opposite but could be a big part of low power and definately will contribute to the smoke.
As far as new rings goes.
The gaskets come in a set, head base and exhaust and its about $10. Or you can get just the head and base. Rings are not expensive. Not hard to do. Even if it were only half worn its worth doing for peace of mind. Plus you can clean out the exhaust port while you are there, its bound to have a bit of a build up of carbon in there.
