I've seen this exact issue nearly a dozen times. You have to dremel out all of the arced fiberglass and may have to run a jumper on the backside or use a razor blade and cut through the board to separate the two lines. That's a via just under the "E" on the left trace so it runs though the board. Any burnt material left in place can continue to arc. Also don't forget to clean all the leaked electrolytic and replace the caps. Also replace the 330 uf and the other small caps in the 5V circuit on this board while you are at it. I am finding that 330 uf cap leaking in around 90%+ of the original DE power supplies.

Did you add a jumper on the backside of the board to fix the trace you cut with the dremel?
Its the non-banded side of diode D8 and it's the junction of 5 components according to the schematics. Just see where the via on the backside of the board went.

trace (resized).jpg

The red area is what you wanted to cut out (or even cut through) to separate the shorting circuits.

Cut (resized).jpg

Yes, you cut through a trace and need to repair it. My first pic with the 2 red circles and red rectangle show where the trace was cut. The rectangle is the now missing trace.
On the back of the board run a jumper from the non banded side of D8 to the trace that connects the middle leg of TR4 to the far leg of R13.