Smoke from a damaged engine is usually the result of an oil leak. Get enough oil leaking and burning and you can set the rubber fuel lines, ignition wires, and gaskets on fire. Once a fuel line is ignited, you have a really hot and big fire. At the time, engines, engine mounts, and wings are made of all sorts of materials. Steel, copper, brass and aluminum don't burn easily, but will melt. Magnesium, on the other hand, will burn with a white-hot intensity. Wing spars were sometimes made with magnesium, some engine parts such as oil sumps were also magnesium. Wing sections were often covered with canvas, which will also burn nicely.

Because you deprive the fire the oxygen. The high speed results in a depression in the hollow spaces of the wing (e. g. fuel tank) or the engine housing (e.g. oil tank). That way the fire dies and as soon as you level out or loose speed the spaces will fill themselves with air again which leads to a new ignition of the fire.