The fuel that we're currently using is fresh from the pump, bought the same day we drove the car.OP (Steven) did say "orininal 351W block".
My immediate concern is, if it's a fresh rebuild, letting it idle for an hour or two is not how the engine should be broken in. First 20 minutes should be 1800-2000 RPM. You have to get the oil splashing around in there to lube everything up.
Another question is: how long was the gas sitting in the tank prior to initial start-up?
I had a "blue smoke" issue a number of years ago. One bottle of Sta-Bil fuel stabilizer solved the problem. The blue smoke was a fuel problem, not an engine problem.
More info needed on the engine though.
We are aware that we need to "drive" the car in order to break in the engine, but before we can do that we have to make it road-legal first.