OK. Remember that your heater motor works by getting a live feed to the coils, which are then activated by the other end going to earth.
If the fan doesn't turn off, it must getting power from somewhere, even if that is via a short from another circuit.
It also means that the fan must be getting an earth to either one of the lecky coils, which should be OK ... or both of them at the same time, which is not OK as that could explain your burning smell as both sets of windings are trying to run the fan at different speeds at the same time.
Near to your heater you should find a rubber plug with 3 wires going in and out.
The centre one should be the Purple/Green and the other two should be Green/Yellow and Green/Slate.
If you disconnect that plug you will be able to check the voltage to the Purple/Green
Then check that when you switch your lever down to fan position 1, you only get a good earth to one of either the Green/Yellow or the Green/Slate. At position 2 one should go 'off' and the other come on. Remember that you are doing this to earth!
Please let me know when you are ready to go to the next stage.