first off, clean the carbs. Even if you think they're clean and the PO says they're clean, they're not. Pay particular attention to your idle circuit. I think even on the 81s, they're pressed in jets. Someone will either confirm or correct that statement, though.
We also need to know what color of smoke this is. Are we talking white, water vapor smoke, black sooty rich-burning smoke, or blue-grey oil smoke? If it's the latter, you might have valve seal problems affecting your compression and making your bike run 'rich' burning that oil.
Without the baffles, and because 650s are hard to tune carb-wise, you have a couple options. Some of the guys here have been able to run straight pipes on their 650s with carb jetting. I'll let them be the pros there. The other option is to find a stock exhaust or an aftermarket 4-1 to provide some backpressure.