No. Any damage sustained during a battle should not be allowed to be repaired simply because the lipo went up in smoke. That's damage sustained and should count as such. If that practice was adopted, it would set a dangerous precedent and people would be wanting to suspend battles to fix damage sustained. If the battery is damaged, it's damaged and shouldn't be allowed to be replaced. I can see where you're coming from but it's a no-go as far as I'm concerned.

As for continuing the fight, it's not a written rule, but it just seems to be the case that whenever smoke appears, the fight is stopped and judged up until that point (or assumed that the smoking robot has broken down). It basically comes down to the EO and the venue; the fight is usually stopped to get the smoking robot out and avoid a build-up of smoke that could trigger the fire alarms (and a potentially costly auto call-out to the fire brigade). If the arena was completely sealed and had extraction systems, then I guess you could continue the fight if both roboteers wanted to. Never usually been an issue here in the UK though, but might be something worth firming up rules/events-wise in light of the ever-growing number of lipo powered robots.