That's SOOOOOO Cool!
The sad part is, you're certainly right, it should NOT flame!
I think this is clearly the little regulator board, that's where I'd start. I have a couple of the smoking tank cars, they don't flame, though that would be an interesting option.
FWIW, I noticed a Legacy system there, and you mentioned 21 volts. You do realize that in large print in virtually every Legacy or TMCC engine manual they specify 19 volts maximum, right?