WHILE AT THE GATE WITH THE PASSENGERS SEATED & THE ENGINES RUNNING, THE COPILOT ATTEMPTED TO TURN UP HIS PANEL LIGHTS WITH THE RHEOSTAT LOCATED ON THE FAR RIGHT FORWARD PORTION OF THE SIDE ELECTRICAL PANEL. AT THAT INSTANT SMOKE BEGAN TO ERUPT AT HIS RIGHT KNEE POSITION. THE PASSENGERS WERE EVACUATED & THE COCKPIT FIRE WAS PUT OUT BY THE GROUND CREW. THE RHEOSTAT WAS FOUND TO BE CONTAMINATED WITH HYDRAULIC FLUID, & HEAVY ARCING WAS FOUND ON THE RHEOSTAT AT THE FULL HIGH POSITION. THREE HYDRAULIC LINES WERE FOUND TO BE BURNED IN HALF FORWARD & UNDER THE CIRCUIT BREAKER PANEL ACCESS DOOR. EXAMINATION OF THE HYDRAULIC BRAKE LINE REVEALED STRESS CRACKS DUE TO CHEMICAL CONTAMINATION OR FATIGUE, PERMITTING BRAKE FLUID TO ESCAPE INTO THE SURROUNDING AREA. THE BRAKE FLUID WAS IGNITED BY THE ARCING COPILOT'S RHEOSTAT, & THE FIRE REACHED AN OXYGEN LINE WITHIN SECONDS CAUSING A BLOW-OUT HOLE THRU THE FUSELAGE.