Speaking as one who has fired both coal and oil burning steam, I can state that with careful firing, almost smokeless operation is possible. Of course, it is much easier to do with an oil burner.
A bit of history- Back in the mid 1970s, myself and several associates approached the City of Cape May with a proposal to operate a steam powered tourist train between Cape May and Wildwood Junction. We had the use of an oil-fired steam locomotive, and had a line on several historically correct coaches. Unfortunately, for whatever reason, we could not get a letter of support from the city, which made getting financing for this project impossible.
Going back to the choice of locomotive fuels, neither coal nor oil is the correct answer. The fuel is a minor issue; steam locomotives burn MONEY, cubic yards of it! With coal you need a place for coal storage, a front-end loader (and operator), and on the other end of the iron horse, a place and way to get rid of the ashes. With oil, most of this goes away, but you still have some pretty hefty boiler and machinery maintenance costs, especially with the new standards that require a complete boiler overhaul every 15 years. Need I say more?
I think we should all be thankful that Tony is operating anything at all; the Budd cars are pretty unique in their own right. If Tony and his company hadn't stepped in when they did, it is highly likely that there would have been another bike path between Tuck and the Cape.