89' 35hp Merc problems

[labcrazy]

i recently purchased a boat that has the above mentioned engine. First time out ran great but I started getting the constant alarm. As it started happening the moment the motor turned over I knew it didn't have time to overheat. I did notice the oil resevoir was a liter low so after adding oil the alarm went off. Now I am starting to have a different issue. I used to be able to top out at 28mph but now when i go over 20mph the rpm dies and the engine starts to lose all power. when i back it down to 20 it runs fine (2800 rpm). the last time out i was having a real hard time starting the engine and noticed a lot more smoke than I have seen on outboards and i couldn't even idle without choking the motor. when i finally got back on trailer i noticed the oil resevoir was 1/2 empty. Please keep in mind that I had a brand new tank of gas (premium), a full oil resevoir (quicksilver plus 2 stroke) and quick silver fuel additive. Can anyone tell me what is happening? I think next time I'm out i will get stuck so i am afraid to go out again. Please help...

[boats.net]

If it has the Auto-Blend oil injection system then would be better off removing it and mix 50:1 oil ratio in gas.
Check compression.