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The chemical reaction between the nitrogen dioxide from the wood burning ceases to form the pink "smoke ring" at 140*. Below that temp, the nitrogen dioxide dissolves on the wet surface of the meat, binding with the myoglobin in the meat to form the pink "smoke ring". That magic temp of 140* really has nothing to do with the absorption of smoke flavor. You can continue to add smoke wood to your fire throughout the entire smoking process if you want and it will continue to build smoke flavor on the outer layer of the meat. You just don't get any "smoke ring" formation above 140*.
And yes, it is possible to over smoke meat. That magic middle ground is part of the art of smoking (it's only a science to a point).
I am of the opinion that moist meat will continue to absorb smoke better. This is why a lot of us "spritz" pork butts and other cuts later in the smoke. It adds flavor from the liquids used in the spritz and helps bind more of the smoke to the meat and aids in the formation of a bark. But you can overdo the smoke (and yes I have done this before, it is noticeable in the finished product).