Dremel tools are designed for small detail work not heavey duty grinding/cutting. These tools are not drilling machines and as already stated, the drill is many times more powerful than the dremel tool
The Dremel tool is not a toy though.
if you are using the metal cutting/deburring bits and applying too much pressure so the dremel tool's motor slows down it will overheat. The reason the dremel tool's motor is slowing down is you are overloading the motor.
When you hit a snag as you put it and the motor stops, this is stalling and overloading the motor.
Contuous overloading the dremel tool's motor will eventually burn it out.
Read the instructions that came with the dremel tool .
If the motor slows down decrease the pressure you are placing on the work.
If it was the motor that was smoking, you likely have already damaged the dremel motor.
If the smoke was coming from the work you were using the dremel tool on, you may have taken the temper out of the cutting attachment. If this is the case, you will have to get another attachment for it to work properly
40 plus years certified electrician