'If I adjust the butterfly so it is closed,( just closed barely as the instructions say) the engine smokes and stutters until the choke opens up a bit."

This suggests the vacuum pull-off is either not attached to vacuum or the actuating piston is stuck. The car runs poorly until heat expands the choke spring enough to start opening the butterfly.

"If I leave the butterfly an 1/8 inch or so open..the motor starts and the choke works for about 15 seconds and then the car stalls. ( butterfly now almost completely open) Restart and it's like a cold motor with no choke and unless RPM's are kept up, it will stall."

Rotating the choke housing to open the butterfly 1/8 inch positions the butterfly for easy start, but it also reduces the amount of choke spring expansion required to open the butterfly the rest of the way. Once the engine is started, expansion of the spring opens the butterfly sooner.