The answer that they gave in the end was, indeed, master off first; but they said that they would consider squawking 7700 then immediately turning off the master. Faster than a radio call, and they said that as soon as you hit 7700 it will transmit, it won't wait to be interrogated by primary radar...is this correct?
I'm not a specialist in transponder electronics but I've heard from a few sources, including an IFR Center controller, who said that even if you have 1700 set and then turn the first digit's knob quickly through 7, you will hit 7700 and it will immediately set off alarms in all towers and centers that are picking you up on radar.
It's interesting that they'd tell you to squawk 7700 but not do a radio call. I can almost guarantee you that I'd be able to get out a mayday call before I'd be able to set my transponder to 7700. Plus, anyone who hears the mayday call will know where you are but if you squawk 7700 and immediately turn off the master, you will disappear from radar and no one knows where you are now!.. unless a controller happens to be looking right at your location when the alarm goes off. You've just wasted a few precious seconds for nothing.
I'm not sure if ATC has the capability to 'replay' their radar screen to see what just happened, I think that would be the only way to figure out your position. Someone who is from ATC would be the one to answer that.
I still advocate that you follow your checklist immediately and turn off the electrical power. If that fire is self-sustaining before you get the master turned off... you will be having a bad day. Don't waste time!