Offhand, sounds like a bad injector pump. There's a nylon gear in the governor that has a nasty habit of disintegrating, and when it does, it fouls the check valve at the top of the pump that the return line's attached to. When the check valve gets fouled, the fuel doesn't return properly...and, for whatever reason, when the fuel return system's clogged, the pump's timing retards itself. The blue smoke, quiet engine, lack of power, and dying are all symptoms of retarded timing.
I would pull the check valve (the black piece with an elbow screwed onto it; the elbow's attached to the metal return line) and see if it's gunked up. There's a spring-loaded ball inside the valve; it should move freely. If not, you could replace the check valve for a VERY temporary fix (or, for that matter, with a small sharp object like an electrical test lead, you can clean out the one you have), but if it's gunked up, it's time for a pump.
If that checks out okay, I would have the timing checked...
Hope this helps...good luck!
