The way you wired up the Pertronix seems like it should be OK as long as that fuse is energized only when the key is in the run or start position. You don't want the Pertronix energized when the key is in the accessory position.
If you have a multimeter, have someone measure the voltage on the + terminal of the starter motor when you engage the starter. Do this with the Pertronix module connected and with the module disconnected. A low voltage on the starter motor + terminal is the only thing that can cause the starter motor to turn the engine over slowly (short of the starter being faulty). If everything is OK, the voltage on the starter + terminal will probably be around 10 volts or a little higher when the starter is engaged. If the voltage on the starter + terminal is 10 volts or more with the Pertronix disconnected; but, drops with the Pertronix connected, something is wrong.
I would be surprised if the Pertronix is causing the voltage to drop while it is connected. If the Pertronix was somehow shorting out, it would have to be a pretty big short to cause the voltage to drop and I think the module would be cooked pretty quickly. Perhaps have a quick look at the module to see if there is anything burnt. It is possible that the red power wire to the Pertronix module is shorting on the body of the distributor which is causing the problem. Perhaps the smoke you smelled was coming from the distributor rather than the starter. Possible since they are in relatively close proximity.