If you really want to get started on the simulation of fluid like effects (which actually include smoke and fire) then have a look at Jos Stam's excellent "stable fluids" paper. It is perhaps mathematically somewhat involved if you're not familiar with the terrain. But if you get past the equations (this might help), it's not that hard. And there are plenty of implementations available.
Just Google "Stable Fluids" :) Perhaps not an actual particle system, but great fun nonetheless.
