I have smoked my own malt several times. I will typically smoke half of my base grain for my smoked marzen that I do for thanksgiving.
Before smoking I just dip my grains in water for a few seconds.
To smoke the malt I do a cold smoke like this.
Old world meat smoking techniques (with which I am more familiar) call for a smudge fire remote from the meat. Smoke travels through a tunnel and is cooled prior to entering the smoking chamber.
When I set my smoker up like this it is normally between 80-90 degrees. I smoke the malt for about 4 hours. I use cherry wood, it's my house wood so I always have it.
Do make sure that the grains dry out though. Last time I put my hot gains in a sealed bag and they got wet again. When we ran them through the mill the grain turned to mush. My buddy and I had to dry them out in his oven. It put a great custom toast on them and made his whole house smell like bacon, I know such a big problem and his vegetarian gf loved it
I have never had a loss of efficiency when using my smoked malt. so I don't think it is detrimental to the diastatic power of the malt. Now I have never done a 100% smoked malt beer but I wouldn't think it would be a problem.
I don't think you have to worry about conversion either. When I have tasted the malt after smoking it is not "sweet" so I wouldn't think the sugars have been converted.