There is a really inexpensive course of action:
Just ignore it, and ride the bike as if you didn't notice any smoke at start-up.
Maybe once in a great while it'll cost you a pair of new plugs, but so what? They don't last forever anyway.
As for your other list of questions, there's always BWringer's litany: (swap '650' for '850')
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From Mr. bwringer:
Every GS850 has (or had) a set of well-known issues that MUST be addressed before you have a solid baseline for further troubleshooting.
It's a vintage bike, and it's quite common (as in, every single GS850 I have had contact with) that there are multiple problems that have crept up and slowly gotten worse over the years.
It's not like a newer vehicle, where there's generally one problem at a time.
These common issues are:
Intake O-rings (install NEW OEM or Viton only - common nitrile o-rings will quickly deteriorate from heat)
Intake Boots (install NEW -- these cannot be repaired)
Valve clearances (more important than most people think)
Carb/airbox boots
Airbox sealing
Air filter sealing
Petcock (install a NEW one)
On '79 models, install new points or Dyna electronic ignition (or at least verify that the old points are working correctly)
On all models, it's fairly common to have problems with the spark plug caps. These are $3 or $4 each, and often worth replacing if you're keeping the stock coils/wires.
Stock exhaust with NO leaks or holes -- good seals at the head and at the junctions underneath.
None of these things can be neglected, worked around, or half-assed in any way. Once they are squared away, you most likely have a bike that runs like a dream -- these issues account for a very large portion of running problems.
If not, then you can pursue more exotic problems. For example, I have found incorrect float heights a couple of times due to a common misunderstanding in how these are best measured. But you can't uncover other problems without making sure the intake/exhaust paths are leak-free, the valves are adjusted correctly, and you're getting good spark.