I just got a Smokin It Model #1 a couple of weeks ago and observed the same thing. This seems to happen while cooking as well.
Riblet - How smoky has the food been, especially when using the recommended amount of wood? I followed some of the advice on the Smokin It web site (FAQs page) to not preheat the smoker before adding the food. I've seen research on other sites supporting that information so I went with it for my first couple of smokes and had a serious creosote issue on the food! For the last smoke, I have preheated the smoker for about an hour during which a lot of smoke is generated. That smoke is noticeably white and heavy - obviously not desirable. I add the food after that initial smoke dissipates and the creosote issue seems to be gone.
Didn't mean to hijack the thread but they seem to be related items and wanted to make sure you saw it. I will create a new post regarding this too.