On most GM vehicles you have a minimum of 3 grounds in the engine compartment.
1. Battery negative is grounded to the alternator bracket or the engine with a large diameter main battery cable
2. The engine is grounded to the body with a braided ground wire that runs from the back corner of the engine to the firewall area
3. There is a small body ground wire running from the battery positive over to the fender and/or radiator support.
It sounds like grounds 1 and 2 fell off, broke, or burned up, and your alternator was grounding through ground number 3 (the smallest wire). This small wire is not sized to handle the full alternator output so it started to smoke.
Check all the connections on grounds 1 and 2, and use a continuity tester to make sure they are not broken internally.
When a fusible link burns up you will get some smoke because the insulation on the outside is designed to be soft enough to burn as the wire heats up. The insulation will also be obviously very soft and the wire will be broken inside. However, it will not create very much smoke.
The fusible link on a 92 should be easy to find because it will have a large barrel-looking plastic section around the wire where it transitions from regular wire to fusible link. Figure 21 on this link has a fairly good picture of what it looks like and what happens when it burns out.http://www.procarcare.com/icarumba/r...ia_lights2.asp