Thanks all of you for the many great tips. I feel like I got to know this truck a WHOLE lot better in the past few hours.
So ... the issue was the fuel pressure regulator (prize goes to Rusty). The diaphragm or whatever is inside had clearly broken because it was dumping lots of gas straight into the intake manifold, through the vacuum line. It must have pumped about 2 gallons worth into the intake. Come to think of it, I better replace the oil and fillter as some of it probably washed down the cylinder walls, past the piston rings. Raw gas was coming out of the tailpipe!
First I replaced the distributor cap, rotor, spark plugs and the ignition module (applying the layer of grease that came with the module), thinking the problem was ignition related. Last week I had already put in fresh spark plug wires. However replacing all these ignition components made no difference, still the same bad symptoms.
So my neighbor, a retired longtime Ford mechanic who worked on these cars who was helping me, and I went for the next thing (fuel) and when we pulled the vacuum line off the regulator, fuel just ran straight out. I turned on the ignition and it just squirted out of the vacuum line. So I got a new regulator (thanks for auto parts stores who have all this stuff in stock), installed it with a new fuel hose (the PO had fitted a piece of too-large diameter coolant hose), and ...
It started up and immediately ran fine, on all cylinders and smooth. There was still a huge cloud of blue smoke coming out the tailpipe but my neighbor said not to worry, it is just burning up all of that raw fuel. Probably this was gas mixed with 'washed-down' oil. After a minute or so the exhaust color started to turn grey. It kept smoking like this for about 5 minutes, burning up the raw gas in the exhaust, and then the smoking stopped. I went on a 15 mile ride and it ran super sweet. Even the cruise control (my yesterday repair) now works. It's most likely an aftermarket unit. No buttons on the steering wheel. But it works fine.
The only change now is that it upshifts a bit quicker than before, making the car a bit 'lazier'. It was probably running rich all the time as I suspect the FPR had a small / pinhole leak before it completely failed yesterday. I checked the mileage for the first time yesterday and it was around 12 MPG over the 5 weeks since I boughg the car. I filled it up again and will monitor mileage.
So all's well that ends well. Turned out to be something relatively simple and inexpensive. Plus now I have most ignition parts new, which is nice to know. My only worry is the gas may have ruined the cats, and/or the oxygen sensor. The check engine light is not on though. I will check for codes in a couple of days, after changing oil + filter.
Thanks all again, I do love this little truck!