1. Is the smoked transformer IC on the phone side or the ethernet side? If it's on the phone side, you can rule out ethernet mysteries.
2. Certain Speedstream modems, as I found out the hard way, can get into an inexplicable kiss-of-death scenario with certain systems. This happened to me with a 5360 when I happened to hook up a Netgear WGR614 in place of another router. However, in my case, the modem could be observed rebooting every minute or so. (Presumably some
relatively common network activity looks like a firmware flash command to the modem; there's a nearly forgotten Windows utility to reflash the 5360, YMMV with a different model. I never tried it since I didn't have a Windows machine around.)
The coincidence is pretty inauspicious, but it could have just been one instance of defective hardware followed by the strange Speedstream bug. I'd sacrifice one more modem to it, of more recent manufacture, to find out.
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Oh, and re grounding/earthing: The 1200 has a ground, but those modems all run off wall-warts, and unless your locale has significantly different regulations, the wall-warts are two-pin devices. You could have dirty power or the 1200's supply might be providing dirty DC to the PCMCIA slot, but that strikes me as less-likely if the Speedstream problem is what I think it is. (Also, yes, whether or not a device is grounded by a third prong, you can still have weird things happen with the neutral... but has anything else been troubled by it?)
If you're really paranoid about the NIC possibly taking out the modem, I suppose you could put a $10 hub between the modem and computer. Unless the hub fails and takes something out with it.
