Hi Johan

You are right.The diesels absorbs large amounts of fresh air.U-Boats had air intake masts and valves fitted in her conning towers .This as high as possible position was selected to make them as dry as possible in a usually very wet environment.The fresh air so taken was then driven by piping (running parallel over the exterior of the pressure hull) towards the diesel engine room where it entered the pressure hull through air inlet control valves.
Those valves at both ends of the pipings were closed before the U-Boat got underwater.
The diesels exhaust gases was thrown away by piping (running parallel over the exterior of the pressure hull) throught a holes opened in both sides of the outer hull after part .They were sealed by previous exhaust control valves when submerged.
Of course the diesels exhausts generated smokes.Their quantity and visibility it
depends on the engines health an meteorological conditions.

I recommend yoy the book
"The type VII U-Boat" of the Anatomy of the Ship Series, by David Westwood.

Best Regards