The diode D1 and the power supply are in the upper left corner of page 4 of that schematic. It appears to connect +5V to GND.
Looking up diode polarity, it looks like that diode is reverse polarised. I vaguely recall that diodes have some use when placed backward. Usually one thinks of a diode as only allowing current in the forward direction, and preventing it in the backward. If my diode broke, maybe it would be acting as a short, producing the smoke from current rushing through it to ground.
