How do you handle the fires caused by adding wood chips to coal?
Don't bother soaking them. Dried hardwood doesn't readily soak up water, so for this to work you'll have to either soak for a rather long time or start with green wood... but if you're using green wood then you don't need to soak it. 

For good, consistent smoke, you want to control heat and airflow: as hobodave notes, you can control heat by simply moving the chips away from the coals. If the design of your BBQ allows, you can do as he suggests (horizontal separation); otherwise, try placing the chips in a pan above the coals. 

For airflow, you can adjust the vents on your BBQ - if you're getting flair-ups with the lid on, chances are you're letting too much air through. You can also limit airflow to the chips themselves by wrapping them in a packet fashioned from sturdy aluminum foil with holes punched in it (but you'll still want to separate them from the coals, or you'll just burn through the foil and be back where you started).