For starters, do a cold compression on both cylinders to get an idea what condition the top end is in. It will save all kinds of future headaches.
On the cylinder that is smoking, after you do the first compression test, pour a small amount of oil into the cylinder and do another cold compression test. If the pressure is higher, the rings need to be replaced. If the compression does not increase, the valves are not sealing. Do the test with oil on the other cylinder also.
Is the oil leak coming from the seals or the gaskets? or is it coming from the main engine cases? If it's not coming from the main engine cases, don't split them open if the transmission is working OK.
If you do split the main engine cases, go to your local Yamaha dealer and pick up some Yamabond. It's the best stuff out there. I use it on all kinds of bikes that I rebuild. Make sure the the mating surfaces are clean and oil free and just use a thin film of Yamabond. Oh and while you are in this deep, use all new seals and gaskets. (Cheap Insurance)
Here's a link for a free PDF manual for the 125 and 150's. This should get you enough information to service the motor.
http://classiccycles.2.vu/C92-SM-1959-66
If that link does not work go here
http://www.classiccycles.org/1852/1873.html and click on the green button beside the Honda C92 Benly C 92 Workshop Service Repair Manual 1959 - 1966
And of course, if you have any other questions or run into any problems, just post back here. Someone here will be glad to assist you.