You were powering the servo from the 5V line? That would certainly overload the regulator and put spikes on the 5V line.
Don't power motors or servos from the 5V line ever - motors put high voltage spikes and draw large currents - leading to logic chips either blowing or reseting. Use a separate supply for servos - 6V battery pack is commonly used.
The on-board regulator can take 20V on the input for light loads, but with a servo it'll have to pass an amp or two when the servo is active, and from a 12V PSU there's 7V to drop across the regulator. 7V x 1A = 7W = fried instantly. With a regulator you have to not draw too much current, not feed it too high a voltage, and not dissipate too much power in it. All 3 are vital.
You could have used a separate 5V regulator on a heatsink for the servo for instance, or a DC-DC converter with extra output decoupling, the nano's regulator is not large enough to dissipate much power - it should have simply shutdown though, so I'm rather surprised it blew.