Sounds like it is spitting lit fuel past the exhaust valve and out. Have you done a compression and leakdown check to see if it is good?
Cylinder compression test http://www.youtube.com/watch?v=U0DuLtoHbWg
Cylinder leak down test http://www.youtube.com/watch?v=dsuhkzZXywU
Cylinder compression test http://www.youtube.com/watch?v=U0DuLtoHbWg
Cylinder leak down test http://www.youtube.com/watch?v=dsuhkzZXywU