1. Yes, the video card is after what you explained clearly faulty.
2. Keep the video card in, disable verifier.
3. There shouldn't be anything to configure as long as you use the USB Key Installer that they provide (it formats, installs, etc). In some cases, on some systems, you may need to change the BIOS settings to USB boot 1st.
-- Also, I would just like to note for future reference that you should never under any circumstances power on a system if there's a noticeable hardware issue. For example, when you noticed the electrical odor coming from the video card, the best thing to do is to immediately unplug the power cord from the PSU, and safely remove the video card as soon as possible. If you power up a system with a faulty piece of hardware, you run a lot of risks, with the highest being a fire.
Regards,
Patrick