It seems that due to some "potential problems" with the 360 Racing Wheel overheating and spewing smoke Microsoft is offering a free retrofit to everyone with a controller:

As a precautionary measure, Microsoft Corporation is voluntarily providing its customers with a free retrofit to the Xbox 360 Wireless Racing Wheel. The Wheels were manufactured during 2006 - 2007. 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.

There have been no reported incidences of fire, personal injury or property damage due to the Wheel malfunction. Despite no known safety incidents, we are advising our customers about this because of our strong commitment to ensuring that our products are safe and perform to our design specifications.

Owners of the Xbox 360 Wireless Racing Wheel should stop using the AC/DC power supply until they have obtained their retrofit. Owners may continue to operate the Wheel using battery power. While operating in battery mode, the force feedback feature will not be available. Once retrofitted, owners may run the Wheel using AC power and reactivate this feature.

If you've got one of these controllers I urge you to unplug it from the wall and get it as far away from your pants as possible. Only you can prevent forest fires.