According to the account I read on ASFlyer, the card reader started to smoke, and "a flight attendant took it to the back galley, placed the the device into a trash bin to contain it, and used a fire extinguisher to suppress any possible fire, while the flight crew declared an emergency and prepared to divert."
Which doesn't seem so unreasonable to me.
As for the delay, "Because the original aircraft no longer had the required minimum number of extinguishers on board and required an inspection due to the overweight landing, a replacement plane was dispatched from Seattle to pick up any remaining passengers who chose to wait for the rescue flight back to Seattle."