As GRJ suggests, the PS2 smoke unit does not have the interfering electronics and gives direct access to the smoke heater resistors. The one thing nice about the PS1 unit is you only apply a single voltage as there is an onboard regulator to regulate the voltage to the fan motor. I did not realize it too is $50 MSRP.
I used the off-the-shelf MTH units when there's space. Otherwise I build my own fan-driven smoke units where the raw material cost is maybe just a few dollars. But I do so not to save money but because of fit/space issues. Even at minimum wage, the time spent in fabricating the chamber and plumbing and so on would make it cost prohibitive and getting the air-flow right can be exasperating. Then you have to provision for refilling the smoke chamber when you don't have easy from-the-top access like in a steam engine (see sideways example below). I'd think you have lots of space in your mill to install off-the-shelf albeit spendy MTH smoke units.
For example, here's a recycled photo showing a hand-built fan-driven smoke unit that fits inside the engine of a 1/48 scale F-14 Tomcat model. It uses the same MTH fan motor but a copper tube as the smoke chamber holding the heater resistor. I thought of this when I saw the orange smoke on the left side of your mill photo. This goes to your point of using LEDs to illuminate or colorize the smoke. It really is an effective technique.
Separately, I've commented in other OGR threads (for example) on using so-called mister-fogger vibrating ceramic discs as used in aromatherapy diffusers. I won't rehash the discussions; this route would require a lot of DIY tinkering though I figure the cost would be maybe $5 per "smoke" unit if that and you'd never have to buy smoke fluid again. 
I made this video teaser showing a PS1 smoke unit relative size to a typical mister mechanism...about 2 Watts power.
