Just had a nerve racking experience with my 91 W126, and wanted to share... this failure is probably common to all the ~89+ cars with heated washer sprayers and heated washer lines.
I was driving home when suddenly I saw a puff of smoke come between the windshield and the hood above the battery, and a moment later a huge cloud of smoke blew through the air vents. I've smelt enough burnt electrical things to tell what this was right away... an electrical fire
I pulled over ASAP, shut the car off, and opened the hood. I saw smoke around the battery but didn't find anything burnt or loose. I turned the key back on, waited, then saw smoke coming from the hood itself. I walked around, heard sizzling and saw what the failure was: The heated washer fluid line had shorted out where it enters the hood and all of the hose was burnt. Note this is on an 8A fuse in my car, which did not blow.
I had opened the hood earlier in the day to jump start another car, that was probably the final flex that broke the camel's back.
I had noticed a crack down lower which I fixed with tape. I'd suggest everyone take a look at this. The wires hide inside an outer black rubber tube, so the problem might be hidden.
-Jason