I love this topic!
Its one of my own preoccupations .
I aim to use the charcoal created, but a clean complete burn all the way through to ashe is also desirable, and smoke never is.
Since you are burning pellets, you
should be able to use a TLUD(Top Lit Up Draft)design instead of a sawdust stove design.
This should help minimize smoke.
You don't mention secondary air inlets at the base of the chimney.
That should also help minimize smoke.
Smokeless firepits utilize this.
They also use an outer cylinder that preheats the secondary combustion air.
You can buy a knock off solo stove/ firepit that should work for you,for not too much, but here's a decent diy
video that shows how to make one from stock pots:
https://youtu.be/wG-JGsNAFk0?si=lMuUz_jCrvn6udop
Smaller holes in the inner pot would let you load it with pellets.
Light it on the top( as in Top Lit)usually using a little alcohol, and the combustion air will be drawn up through the bottom holes(as in Up Draft).
For your specific situation, I would build a tlud out of a 3 feet long inner cylinder of 8" stove pipe,with holes ringing it 5"up from the bottom and a mesh bottom inside, 1 inch up from that.
Put the cap on the bottom, affixed with tap screws , then screw the cap to a wooden base, for stability.
The 6 inch distance between the bottom mesh and the wood is there to keep the wood base from charring.
Because you are trying to heat this space, an outer cylinder for preheating secondary air might be counter productive.
Instead we can add an 8" to 6" reducer to your chimney and space it 1/4 to 1/2" from the top of your tlud, allowing for secondary air.
Ideally, you heat a mass using this.
Water or solid, maybe a metal basket full of rocks.
I use the tank of a junked gas
water heater to capture the heat from my pellet burning, TLUD greenhouse heater.
Unfortunately I have yet to seal said greenhouse, so firing it is rather pointless.
You seem well on your way to better outcomes!