It sounds like there's 2 issues here. The roller shorting out on the axle, and the antique transformer not cutting the power in time.
Once again when there's smoke,and or fire there's a "cool affordable classic transformer"lurking in the background of the layout.
Either add a fast acting fuse, or switch to a modern transformer. They had cloth covered extension cords and Christmas lights back in the 40's and 50"s too. You wouldn't dare use them today.