Those two screws are holding the smoke unit in from underneath the frame. (Screw holes are almost under the front pickup roller wheel)
The piston will stay connected to the wheels, but the smoke unit should pull away and up. Goodluck 🙂
There is one screw underneath and a dimple sticking up off the frame that fits in a dimple hole in the smoke unit to keep it straight.
Those two screws on top between the motor and the smoke unit are for a plastic keeper that holds down the plastic drive gear and it's long pin. That drive gear has a pin that makes the piston go back and forth. You have to remove the one screw underneath, the two screws for the plastic keeper, and then lift the whole thing out piston, drive gear, and smoke unit.
Upon inspection, the thin round plastic diaphragm on top of the piston that you mentioned is NOT curled. The piston has a very thin O-Ring around it, but the fit between the piston and cylinder part of the smoke unit housing is loose. I have hundreds of O-Rings, but none thin enough to fit that piston. So I ended up greasing the cylinder and piston so it formed a little better seal (not exactly ideal).
The felt like smoke batting insert was melted a little so I substituted some fiberglass Tiki Torch Wick and stuffed it in there.
It puffs smoke (but not a lot).
I am wondering if the original smoke batting insert isn't better than the Fiberglass wick for this type of smoke unit. The problem is that the looser fitting torch wick allows smoke fluid to go down the piston puff hole thereby wetting the piston and reducing the already marginal seal. But I don't know if those felt like batting inserts are even available.
I may also look for an assortment of THIN O-rings to substitute what's on there to get a better seal. That should produce stronger smoke puffs.
Thanks for the help,
John