For your first attempt I would say you are doing more right then wrong! Try closing the vents more, if you are still fooling around when you read this you can make some aluminum foil gaskets to see if that helps seal the lid up- in fact you can close the vent completely. The smoke you have coming out in that photo is still too white, the chips that are wet are contributing to that no doubt, wood chunks are the preferred method. You only need wood smoke the first hour or so in most cases. The meat will stop absorbing the smoke after 165 degrees surface temps.
How much charcoal did you light to start? You may want to place it at the end of the unlighted pile at the end opposite the vent.