***"When I engage the mower blades I notice a puff of black smoke from the exhaust area. It doesn't smoke when I am mowing, only just as the blade engages.
Is this a problem?"***
Absolutely NOT A PROBLEM. What you are observing is simply a result of the engine governor "snapping" the throttle wide open, for a moment, as it reacts to the drop in RPM caused by "applying the load" of the cutting system to the engine crankshaft. The sudden loss of RPM causes the governor to try to increase the RPM to its former rate. The governor attempts to raise the RPM by opening the throttle plate of the carburetor. This action, in turn, will allow a greater volume of air to enter the engine, along with the greater volume of air, comes a lot more fuel drawn from the main jet. At first, the volume of fuel is great enough to result in a "rich mix", which is why you see the puff of black smoke. The engine quickly recovers its RPM and once it reaches its former RPM rate, the induction mixture has pretty much "leaned out" to a near optimum air/fuel ratio. If the load applied to the engine was greater than what the engine could handle, the governor would still open the throttle but instead of seeing a quick puff of black smoke........you would see a continuous plume of black smoke as the RPM got lower and lower til finally, the engine quit running.

Makes sense. Thanks mownie.

My "new to me" Agway 16.5 hydro atarted to
run blue black smoke when blades engaged.
Thought I'd have to trash the $50 machine.

Turned out the deck belt was routed over the
belt pulley keeper rod. As the oily belt ran
over the keeper it smoked.

Re routed the belt and all is fine.

You could try throttling down a bit when engaging the blades. That may help a bit (I take it you are engaging them at WOT).