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I think its the clutch on the compressor, burnt out. I got half way down the street, and smelled the worst smell, and smoke everywhere. I went back home and opened the hood. I saw like black melted stuff near the compressor. I didn't smell it when the air was off, but as soon as I turned it on, there it was again...
See if you can turn the pressure plate by hand. You can also put a 10mm socket on the bolt and see if it will turn. If it turns easily enough, then you only need a new clutch assembly. If it won't turn, then the compressor is seized and unfortunately, new ones ain't cheap (about $450 without the clutch at the Last Detail)!
I'd say you're right about the clutch.. but see if you can turn it manually like said earlier, that would check to be sure the whole compressor isn't gone.
I just replaced the clutch and compresor about a month ago, and luckily I also purchased the car with the extended waranty and I only paid around $100. With out the waranty, it would have cost me around $1000.