On April 7, 1997, at 1714 central standard time, a Rockwell International 114, N4861W, owned by Montana Engine Rebuilders, Inc., at Billings, Montana, and operated by a private individual under Title 14 CFR Part 91, was destroyed following an in flight fire and forced landing near Oklahoma City, Oklahoma. The private pilot egressed prior to the destruction of the airplane and he was not injured. Visual meteorological conditions prevailed for the local maintenance test flight and a flight plan was not filed. The flight was originating at the time of the emergency. During an interview, conducted by the investigator-in-charge (IIC), and on the Pilot/Operator Report, the pilot reported that during initial takeoff climb from runway 17 at the Sundance Airpark he noticed a "hot" smell due to the thermal wrapping material around the exhaust pipes. As the smell was growing stronger, the pilot made a downwind entry for the runway. Smoke entered the cabin and during the downwind to base entry for the landing there was a partial loss of engine power. By the time the airplane was turned onto base, a total loss of engine power occurred and a forced landing was made short of the runway with the initial touchdown point about 1/2 mile north and 900 feet west of the runway. The airplane touched down in soft soil and during the landing roll the airplane crossed a gravel driveway, and struck an embankment and a fence before coming to a stop. After exiting the airplane, the pilot noted flames coming from the bottom of the firewall and engine compartment. Subsequently the airplane was consumed by the fire. The pilot reported that he was working on a Supplemental Type Certificate (STC) for drag reduction in the make and model of aircraft. The exhaust system and cowling were a prototype with about 7 hours of test flights completed. He reported on the Pilot/Operator Report that the experimental part of the exhaust manifold cracked at the weld. During an interview, the owner reported to the IIC that his aircraft was flown from Montana to Oklahoma about 3 years ago. The pilot, who was a design engineer, was utilizing the airplane for testing a speed modification design. A former employee of the pilot reported that the aircraft had been "extensively and illegally modified." The list included " unapproved engine cowling, cowling barrier material, and the muffler system." On April 30, 1997, the airframe was inspected by the FAA inspector who found an unapproved modification of the cowling and the exhaust system. The exhaust system components were wrapped in a heat protective tape approximately 2 inches wide. After removing the exhaust from the engine and removing the tape, it was found that the right hand exhaust pipe collector was cracked in several areas. For additional details see the enclosed FAA inspector statement.