Did your wood catch on fire? A +/- 40 degree swing isn't out of the question. Couple that with the possibility that the analog nob isn't precise in the first place and your 250 setting could really be 260 and you can easily hit 300. If you're at or close to 300 and your wood catches fire then that could really pump a lot of extra heat into your smoker and give you the reading you saw.
When you say the temp never dropped, how long did you wait? Being insulated it's going to retain its heat for a long time... if your wood was burning then it wouldn't even try to drop until the wood/fuel was exhausted.
Of course, you could be correct that the rheostat is malfunctioning and is the cause. Let us know what you find out.