Hi, thanks for writing in. Almost certainly, what you were smelling was the clutch as you suspect. And, both the clutch and the limited slip mechanism in the differential may be damaged. The 2006 M6 Sequential Manual Gearbox ("automatic") is...
The HID controller may be bad. HID lights actually need the controller to turn the 12 volt DC from your car battery into 3 phase high voltage ac power. If it is not working correctly, the lights will not work....
