Engine fire. Bad fuel heater?
 

I just got back after 9 months over seas, and I left care of my 97' 12 valve to my brother. A few months ago when he went to start it, there was a fire that broke out in the drivers side of the engine. Now when I turn the key to the on position, gray smoke comes off the same side. I can't see where the smoke is coming from, but a family friend who is a mechanic said he thinks it is a bad fuel heater.

Has anyone heard of a fuel heater burning? And also I have seen online that you can buy a lift pump with a shorter plunger, so that you can eliminate the fuel heater altogether and only have one gasket to worry about. Has anyone done this? And if you have part numbers I would really appreciate it! Thanks in advance for any input.