After inspecting my dock and transformer, I found that the smell emanated from the left side dock connector on the dock as well as the power port on the dock. On the pad, the only noticeable damage was just to the left of the lower left side of the screen where the left side dock connector connects. It started to burn or melt whatever it is under the screen. It's difficult to say whether the pad or the dock or both is at fault for this. But my guess would be the dock.
Both are having to be replaced. I am still within my in-store return, however, best buy is having to order and ship it because they don't have any 16GB models left.
Pad Serial: C30KCTxxxxxx
Firmware Version: 220.127.116.11
Dock Serial: C30KCTxxxxxx