I missed this article last week.
I learned from Gregg Keizer at Computerworld (and various news sites) that the Wheel should have a free retrofit applied. There's an announcement on Xbox.com that notes that "a component in the Wheel chassis may in rare cases overheat and release smoke when the AC-DC power supply is used to energize the Wheel."
"Owners of the Xbox 360 Wireless Racing Wheel should print out the retrofit form or call Microsoft at 1-800-4MY-XBOX to register to receive the retrofit and protect against the potential hazard described above. Instructions will be provided with the retrofit. We are notifying and will be coordinating our response activities with the relevant regulatory agencies such as the U.S. Consumer Product Safety Commission. This may impact delivery dates."
Until you receive a retrofit for your Wheel, Xbox recommends that you run the wheel on batteries only.