Steel wool will burn if you hold it in a flame so, if that's what you were doing, the smoke you were seeing was from the steel wool combusting. When you're vaporizing DMT, you won't be holding the flame nearly as close. The sweet spot for The Machine is around 6" below the steel wool. My point is that there will always be fumes if you hold the lighter close enough to the steel wool. You want to burn impurities off of the steel wool without burning the steel wool itself. Also, this will be easier with thicker steel wool. Otherwise, it sounds like you have it figured out anyway, so good luck to you.
The Machine is awesome, by the way.
Every day I am thankful that I was introduced to psychedelic drugs.