Gauges going all the way on startup + smoke

And that plug in type mechanical limiter was designed for the standard instrument panels that had only 2 thermal gauges (their oil was a warning lamp operates on 12 volts). Rally panel has 3 thermal gauges, thus a different type limiter.
So... the outboard mechanical limiter for 2 gauges that someone added to you rally panel will and did work, for a time anyway. You could simply throw another at it and see what happens but... If there is any chance that the sender wire fell off the oil sender and shorted to ground (more common to unpainted aluminum intakes), that would affect all 3 thermal gauges. Diagnosis is always better than throwing money at a problem. And as much as much as the solid state regulator from RTE will cost, it's still the better bet long term. Good luck