Dang! You guys are killing me! The use of ATF, kerosene, diesel fuel etc. is intended as an engine oil additive by adding one quart to a hot idling engine and letting it idle for 5 minutes then to change oil. This is to help unstick rings, valves and lifters. If you look into the oil filler cap and see lots of buildup this is a good temporary fix but more than likely you need to replace your valve stem seals. As for the water injection, that is to break up carbon buildup in the combustion chamber and pistons and it's done by revving the engine up to about 1500RPM and SLOWLY pouring in just enough water to slow down the motor while trying to maintain 1500RPM for about 15-30 seconds. Caution has to be noted here as large chunks of carbon can break off and get lodged in the valve opening causing a bent valve.

Now as for the original posters problem with dieseling. This is most likely caused by what was previously mentioned as timing too retarded or running too rich. The ladder being my guess as old gas and old carb seals are probably causing seepage. I'd freshen up your carb, check your timing, check for vacuum leaks and see where that leads.