horn relay electrical short circuit HELP

[MajnoLo]

Hi there. 2003 E46 Wagon XiT. The horn stopped working. Both sides. Fuses fine. Figured it was the relay. Bought a relay. Took out the glove box, took out the old one and plugged the new one in. When I did, I noticed a spark. Hmmm... Odd... Then one of the wires coming out from behind the relay connector started to glow bright orange and cause all kinds of smoke. I immediately pulled out the new relay. Putting the old one back in does not cause this problem.
So now I have:
- a horn that does not work
- a wire that has lost all its jacket due to heat - glows bright orange (i.e. wicked hot!!!) with the new relay in
- an old relay that does nothing
- a new relay that causes this massive short circuit
WHAT NOW??
Thank you!
Lorenzo
cell: 617-480-3710
email: Lorenzo@inspeed.com

[MajnoLo]

OK so a quick update
turns out I put the replacement horn relay in the wrong spot (#2) - for some reason I remembered seeing a photo on the web stating that was where the horn relay was. Although schematically identical to the one that came out, it did caused some sort of short!!
ANYWAY I replaced the proper horn relay (#6) with a new one (I threw away the one that caused the short), and the horn still does not work. So - the fuses are ok, the relay is new, still no horn. Could it be in the steering wheel? (I noticed that my cruise control no longer works either)...
Thanks!