I imagine the smoke is actual smoke filmed in real time and then combined in the background and foreground with the finished stop-motion animation print via some sort of matte.
Much better than those monkeyfrog things from the Speilberg version.
Hey, Stevie, here's a little tip: If you want us to be afraid of your made-up movie monsters, don't continually remind us of real-world horrors like the World Trade Center attack or genocides, dumbass.