Well, all good things must one day die. . .  the dremel decided to start smoking and burning my hand while I was cutting out a mounting plate for an RC airplane.  There was no heavy loads, long operating times, or abuse in the life of my dremel tool.  It was barely used on the odd job for the last 2 years but appeared to suffer a meltdown this afternoon.  A post mortem investigation is pending.

UPDATE
I disassembled the dremel to find nothing too obvious dead with it.

The rotor definitely overheated by the looks of the plastic dripping out the sides near the rotor windings. . .

Figuring that I don’t have anything to lose besides letting a little more smoke out I decide to reassemble and plug it back in.  It seems to have straightened itself out over the course of disassembly/reassembly.  I’m betting that the carbon brushes were dirty and causing excess arcing by the looks at the commutator (copper thing at the right of the rotor pictured above with the nice black wide line on it).  We’ll see how long it lasts until I need call the Dremel company