Sounds like you're describing an ammeter fire. Perhaps one of the fuel gauge's leads was resting against one of the ammeter terminals. If the contacts on the back of the ammeter aren't tight, they get hot and eventually set the rubber boots on fire. If you're lucky, the only damage is to the ammeter itself. Just undo the three gauge panel screws and have a look at the rear of your ammeter. If it was indeed the cause of all the smoke, it should be obvious.
The solution has been discussed in the PI Forums many, many times.
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