The 7M is fairly forgiving when it comes to overfilling, but you're pushing it at that degree... Of course you'll need to drain the excess out...The TSRM (linked to all over this site, including in the MKIII FAQ section) shows where the oil pans drain plug is and the torque spec for retightening it.
Overfilling can cause seals to blow, but if you've got smoke something out the tail pipe the overfilling only finished the job of blowing a head gasket that was about to blow anyway... BUT, it's not a given that the smoke is oil. What color is it? In the light coolant smoke looks white, oil smoke has a bluish tint on a grey color, and excessive fuel looks black or dark grey with little to no color cast.
If you lost a seal other than the HG due to overfilling, removing the excess oil probably isn't going to help. With NEW seals their soft and pliable nature makes them resilient.. they may rebound from the excessive pressures with no problem or merely a reduced lifespan... old seals are another story. Drain the excess and pray.
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