This is the first time I've read about a plug-n-play decoder from the factory melting a shell, regardless of brand.
You should send it back to Digitrax and asked them what burned up. Maybe some other component other than the LED. They'll probably replace the decoder too.
Same here. Unless the decoder was in-fact defective from the factory, had a weak components which failed under normal operating conditions, or was exposed to some conditions that caused some component to fail catastrophically.
FEC, you removed the decoder, but do you still have it? Can you take a clear close-up photo of the decoder area which was directly under the melted plastic?
While I'm not a big fan of Digitrax, I have not heard of any excessive number of Digitrax decoder failures (no more than what I would expect for any decoder).