I found a really great idea online for making smoke, and I decided to use it for my Ogre miniatures games. It is pretty simple, here is what I did:
Black spray paint (flat)
Some small metal washers
Hobby paints (red, orange, yellow)
Hot glue gun
Tear up the fiberfill into appropriately sized pieces. Spray them with the black spray paint, and allow them to dry thoroughly. When they are dry, use the hot glue gun to attach them to the washers. The washers give them some weight so they do not fall over. Allow them to cool a bit. I glued mine on top of a ceramic tile so that I could easily peel them off without damaging them.