You've got a few problems. It sounds like you've got a blown clutch seal. Your jugs is probably worn past the service limit and will need a bigger piston + bore job. You'll also need gaskets. Only the 4 bolts are holding the cylinder down. The gasket will stick the cylinder and the cases together. Once the 4 bolts are removed, use a mallet to knock the jug loose (tap upwards). What ever you do, do not pry on the gasket surfaces. The aluminum is soft and will get damaged. You'll develop air leaks if you do. Airleak+ 2 stroke = toasted motor.
You've got an air leak, probably the clutch seal. It'll make things hard to start, and when they do start, rev high. It'll pull oil in from the transmission and cause it to smoke bad. You should always been smoking some, these are 2 strokes. If your not premixing, then you'll need to make sure your oil tank has oil and the line going to the oil pump doesn't have any dirt/air bubbles in it.
The carb settings are in the manual, and will tell you how to set it. Theres a website you can download this from (i forget where).
After all the work you do, you'll need to do a leak down test on the motor. Look up 2 stroke leak down test. If your motor passes the test, then you'll have a good running motor for a long time.
I just wanna go fast. If your not first, your last!!
Reproducing the Tecate CDI. Contact me if you need one. I'm most accessible on FaceBook. You can find me on the 1984-1987 Kawasaki Tecate KXT250 Group.