Sorry, that’s the right side of the loco but wrong location; I remember being fooled by that too. It’s right at the back of the engine under the cab and close to the trailing wheels.
This still from the Trainworld video of the 49’s version is the only image I have found of the latest run of the VL Challenger with both the dynamo and injector in operation, and you can see where the injector smoke comes out right at the back of the loco under the cab:
As I have said, I think that the assembly for this is the same in both VL Challenger issues. I can confirm that this still from the Bill Yates video linked above shows the injector outlet under the cab and it is actually two, one round and one through a kind of oval-shaped trough above it in the photo:
For completeness, this outlet links to the smoke unit by a tube leading from the top of the unit:
I never got anything anything more than a whisp of smoke from this outlet. By blowing compressed air (using an airbrush) into the dynamo outlet on top of the engine, I confirmed that the airway to this outlet was clear (the air came out of it) and then when I took the boiler shell off, I saw that the tubing was all connected and not bent/pinched.
If you compare Bill Yates’ video to there being no or minimal smoke from this feature, you’ll see that he got spectacular results and probably as a result of saturating the wicking in this unit by taking the shell off, the unit apart and filling it that way rather than through the dynamo opening:
At this stage, if you want this feature to function as best it can and don’t want to take it apart yourself, I wouldn’t return it to Lionel but send it to one of the repair techs on this Forum (AlexM or GRJ) and let them do the necessary. Lionel should be capable of dealing with these warranty issues but I am not sure they do in all cases. The extra expense could be worthwhile depending on how important the feature is to you.
The only other thing that occurs to me is using small diameter flexible tubing to feed the smoke fluid as far into the funnel as far as you can. Bill Yates mentions that in his video but not sure he showed whether he invented anything for that purpose. I can see that might compensate for the fluid pooling in the funnel. I've done something similar with a squeeze bottle having a needle tip applicator to put the tubing on.
In my case, the model developed a sound fault which I have never got around to fixing myself and so I did not pursue the smoke issue any further. I’m tempted to take it apart again (NOT an easy exercise in terms of getting it all back together correctly/without damage) but I have other models to run and, of course, work on.
P.S. I never had the smoke fluid leakage problem you and others have reported with the new issue VL Challengers. I was pretty conservative about the amount I put in and used a needle dropper to get it well inside the funnel assembly; I also blew down the dynamo opening. I really don’t understand how the leak could occur but maybe I was just lucky in that respect.