Greg, everyone has their own method and opinion and everyone is right and their method is the best.
Personally, I've found that wood chips are only good for smoke bombing the grill. About 5 minutes of intense nasty acrid creosote filled smoke and they are done. I never found that wrapping them in foil made any noticeable difference. You can get a cast iron chip box (normally used in gas grills) at any hardware store and that will slow down the chips burn, but with banked coals, it might not fit very well and you'll have to set it on top of the coals, which could affect how the coals burn.
You could get an A-maze-n smoker tube and pack it with pellets, light it and toss it in the valley between the banked coals and depending on the length of the tube, it should make smoke for a few hours, which is more than enough. You can find them on amazon, but here's the manufacturers website:
http://www.amazenproducts.com/SearchResults.asp?Cat=12
I have the 5x8 maze one and I've never had much luck getting chips to burn properly in it, so I use traeger pellets. The tubes might have better luck with the chips.
When I use a grill, I typically just add a bunch of chunks to the charcoal, each one about 1/3 to 1/2 the size of your fist, probably 8-10 chunks total, then let them burn down until most of that nasty white smoke is gone. Then open the lid to put the food on and that breath of fresh air will snap them over to burning clean and blue smoke. If you want some wood chunks, LMK, I have tons here in a number of varieties, I can bring you a shopping bag full at the barn herf.
And, lastly, you could always just switch to Lazzari mesquite lump and you won't even need the extra wood.