Smoke from an electronic device is rarely good... since they run on smoke, and if you let the smoke out...

The easiest way to troubleshoot the cluster and blue wire part of the charging circuit is to:
1) disconnect the blue wire at the alternator and ground it, ideally thru a fuse for safety
2) turn on the ignition... "BAT" light should come on
3) turn off the ignition... "BAT" light should go out
4) connect the blue wire, ideally thru a fuse for safety, to the positive terminal of the battery
5) turn on the ignition... "BAT" light should stay out
If you don't find any issues with the cluster or the wiring based on the above tests your alternator was probably permanently damaged when you hot-wired the excitation terminal directly to the battery.
If you fail 2, 3, or 5 the cluster or the wiring to the cluster has a problem. To check the wiring you can pull the cluster and check for continuity between the alternator end of the blue wire and the cluster pinout... this site:
http://www.xjamiex.com/mk2resource/electrical/electrical.htmlhas the pinouts, depending on what cluster you have.... probably a CE2 given your model year.
If you have continuity then you're pretty much left with a cluster issue... looking for loose solder joints is the usual first step.
HTH,
Vince