Thanks everybody. Yeah, I think I need to take it in and let them deal with it. I'll keep you posted...

 

Hows the air filter? Have you cleaned and reoiled it? What kind of oil was used?
Its posible the filter is over oiled or wrong oil, and thats whats causing the smoke.
Usually smoking on high vacumn (like on compression braking) points to rings.

 

yes, you are correct in guessing the valve guides/ valve seals, that would be my guess as well. On engine braking and deceleration the vacuum builds in the combustion chamber since the carburetor is closed, this in turn tends to suck oil down the valve guides. Then when you open the throttle, the rush of air pulls the oil into the combustion chamber and burns it, and you get the blue smoke clouds.

Bring it back to the dealer, it's not normal. I have 50 hours on my rancher and no blue smoke at all.. I get some white smoke on cooler days from moisture in the exhaust which goes away after few seconds. I hope yours is still under warranty.