New issue popping up with the X1, if your X1 starts smoking after a few days/weeks of use make sure to file a warranty claim.
It may still function fine for some time, but smoke is a clear indicator of an electronic fault and will eventually fail or worse start a fire.
Yeah, that's an easy one, MS will replace that easy enough. I'm not sure why anyone would keep using something that was smoking though.
Also, I would try to make sure that it truly is smoke and not just dust. Let's not forget that the large fan sit right where that 'smoke' appeared and it coule have easily been a small amount of dust build up being thrown out.
Smell would tell you quickly if it is indeed something burning.
So far, I've been keeping track of the temps of both my consoles and neither have shown any issues. As I said in my initial X1 review, it turns out it runs a bit cooler than my ps4, but both are perfectly acceptable even during the most intense usage. Its much better than it was for the 360/ps3 early days.