The smoke around the "body" is normal. As you cook on it more, it'll get loaded up with nasties that'll help seal the lid better. Just don't clean the lip that the lid sits in.
Although I have yet to try it, there was a thread here recently about not using water in the water pan. I just can't wrap my head around the concept, although I'll give it a shot someday as the clean up sucks. The fact of having a heat sink in there (clay late, steel plate, or filled with sand) is the most important factor.
But like the guys said, it'll have it's own "personal" temperature and there's not much you can do to fight it, as long as the leaks are sealed(ish).
"Do not eat the meat raw or boiled in water, but roast it over a fire." - Exodus 12:9