After reading up on Copper and playing through Dead Money several times, I believe the 'Red Cloud' at the Sierra madre is rust or some kind of toxin based off of copper being spewed from the Villa's Ventilation systems, reading terminals in dead money someone tells how there were problems with the ventilation system and this red dust. Copper, when deteriorated can be corrosive and somewhat harmful and can lead to illnesses like arthritis..dunno if Father Elijah's arthritis is related to this or not. So Basically, my theory of the Cloud is that the copper deteriorated and gave off toxic dust which entered the villa's ventilation system, which spread more and more throughout the villa, knowing that the workers made the villa cheap and junky as read in the computer terminals in dead money, copper may have been used for pipes and other things in the village because it is cheap.