I wouldn't expect it to race with the choke off during the first few minutes of operation. A cold engine should be reluctant to run without the choke, and race a bit while the choke is on, especially as it warms up.
That, combined with the fact that it doesn't want to run with the mixture screws backed out at all (they fatten the mixture going out on CV carbs--opposite of slide carbs) makes me thing the bike is running way too rich. If the smoke in the exhaust is black (black=excess fuel<-->white=burning oil) that would further suggest you have too much fuel.
Here are a few things you can check:
1) make sure the float/fuel bowl levels are ok. Too much fuel in the bowl will richen the mixture.
2) make sure the enrichener discs are not backwards. Pics here:
http://bmwmotorcycletech.info/bingcv.htm I'm not sure if having the discs in backwards will make the choke work backwards, but if you have the carbs back off it's easy to check
3) make sure your carb jets are stock.