Your temperature was too high and it melted the fat in the meat.
By seasoning your smokehouse you add a thin layer of smoke to the inside surfaces of the smokehouse. This thin layer of smoke helps in reducing moisture within the unit, which reduces rust and increases the life of the smokehouse.
While chips burn faster, sawdust will last longer.
NO. This process is used to coat the inside of the smokehouse to protect it from moisture. By adding water we are adding moisture to the process, reducing the effectiveness of the seasoning.