It blows a grayish and white smoke out of the exhaust system. I have engine compression of 320. all 4 injector have been rebuilt. Replaced all of the fuel and filter. air filers also replaced.

Piston height was ok when assembled?

Yes, and coolant was disappearing after rebuild then I'm guessing the 3rd cylinder hydro locked at start and bent the rod.

Head is removed so the crank should manually bar over with little effort and rotate smoothly and not bind at any point. If a rod is bent it will likely bind up at the same crank position(s) for every rotation.

Did you install a new injection pump?

White smoke:

White smoke is caused by raw, un-burnt fuel passing into the exhaust stream. Common causes include:
·Incorrect fuel injection timing
·Defective fuel injectors
·Low cylinder compression

Low cylinder compression may be caused by leaking valves, sticking piston rings, ring wear, cylinder wear, or cylinder glaze. When white smoke occurs at cold start and then disappears as the engine warms up, the most common causes are fouling deposits around piston rings and/or cylinder glazing.
Continuous evidence of white smoke indicates a mechanical defect, or incorrect fuel timing.

Seek out another mechanic. White smoke from the exhaust is a symptom of coolant entering the combustion chamber. Most of the time this is caused by a blown head gasket. A loss of coolant with no apparent leak, a white foamy substance on the underside of the oil fill cap, oil level overfull, and air bubbles escaping from the radiator are other symptoms of a blown gasket or cracked head. Stop driving this vehicle until you have this diagnosed and repaired. A compression test will verify this. Serious engine damage will occur if you indeed have an internal leak so make sure one way or the other.

Could be the head gasket is about to blow. If you have a turbo then this also could be on the way out.

black smoke is fuel white smoke is oil. change your spark plugs to a hotter plug and run with some hpr 50 engine oil or somrthing nice and thick

The most likely cause is a blown head gasket,but it could also be a warped head,was the motor overheated prior to the problem starting? The white smoke is steam,check the underside of the oil fill cap and dipstick for a grayish brown residue,check the coolant for a low level and oil conatamination,either of these conditions verify that a head isn't fully sealed.Unless your moderately skilled mechanically this a job to be done by a shop.A good shop will perform a leakdown test to verify this.

White smoke usually occurs when there is not enough heat to burn the fuel. The unburned fuel particles go out the tailpipe and typically produce a rich fuel smell. It's not unusual to see white smoke in the exhaust during cold weather until the engine warms up.

Faulty glow plugs or control module can cause white smoke on engine start up.

Low engine cranking speed may also produce white smoke.

If white smoke is still visible after the engine has warmed up, the engine may have one or more bad injectors, retarded injection timing or a worn injection pump.

Low compression or air in the fuel system can also be a source of white smoke.

Hello!
There are two differnt reasons for black and white smoke coming from the tail pipe.
Black smoke means fuel runs rich (car getting to much gas). Check fuel pressure/air filter.
In some cases the white smoke means car is burning oil or transmittion fluid. Have tem checked/replaced.
If you can feel a smelly smoke it can be catalytic converter.
In a worsest scenario if car blowing white smoke it can be engine coolant is getting into an engine cylinder from a bad head gasket ,or a warped/cracked head. So you need to keep your eye on coolant level and check your engine for overheat. Also might be good to check your oil for traces of coolant (on a dipstick it would be a milky substance mixture of oil and coolant).
Good Luck

look for problem injectors and leaking injector seals