You might have two different issues here.

The smell could be caused by dust.  If you have a laptop try running the
vacuum cleaner's nozzle along the air vents at the back.

The overheating issue can be managed by enabling power management in the
open-source ATI driver (or installing the proprietary closed-source
ATI/AMD fglrx driver as you described in comment #2).  To find out how
to enable power-management in the open-source driver, see
http://www.x.org/wiki/RadeonFeature/#KMS_Power_Management_Options

Also, you didn't tell us which ATI video card/chip you have.  Can you
please attach the output of lspci -vvnn

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https://bugs.launchpad.net/bugs/721089

Title:
  Alpha 2 Asus ATI overheats under no load, fans surging and extreme
  heat from vents.

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