Interesting take, thanks for the post! I agree with pretty much everything.
I got one for my wife but she wants a track car. I want to get rid of the Smart but she adores it. It's like a purse dog... can't argue. I'm gonna get her an E36 M3 but I don't know if we'll keep the Smart. The new model offers several key options which I feel are sorely lacking - but she doesn't really care (namely cruise).
My main shock with this car is how a car so small can handle so poorly. I thought it would be a gokart with a body on top of it and it was more like a hotwheels truck with an engine. I refused to buy her the first generation because it was downright scary on the highway. The new one isn't exactly stable but it's ok.
The thing that bugs me most is the transmission. I think I could shift faster and more smoothly when I drove my dad's manual Lada in Russia when I was 8 years old. It's just awful, I can't think of anything it does well except maybe for the launches. It seems to be programmed to always be in the absolute tallest gear possible. Every shift is a power shift even though it takes forever. I can drive it smoothly by lifting between shifts but it still takes ages.
I could swear that my racecar with 900 lb linear coils rides better than this car. Any rut feels like I just hit a curb. With the dramatic way it crashes over things, I always feel like I should have a cracked rim.
And there's no spare... she got a flat tire once, had to wait an hour for a tow truck and another hour for me to get there and pick her up because the dealer was closed. They dealer threatened me with a new shifter mechanism because they couldn't get the car out of gear (said the tow truck driver must have forcefully yanked it to get it into neutral), then it turned out it just ran down the battery because the towtruck guy left the keys in the ignition. I gave that service manager a lecture in manners and assumed guilt before knowing facts. The curious thing to me is that I've seen MB clients bitch these guys out for absolutely nothing (like one guy who swore loudly at a service manager who refused to tow his car for free and replace a battery, which went flat after he parked the car and left the country for 6 months), so I wonder if they take it out on us Smart owners in turn.
Also if you let the transmission powershift the way it does, you gotta get used to other drivers flashing you at night because with the car flopping back and forth, the HIDs blind them off and on (or if you're on a rough road that makes this little thing pitch around like an epileptic).
The fuel economy is misleading because it takes premium, so the 40mpg costs you more like 36-37mpg in a car which takes regular.
Driving it on the highway is really annoying for me. I'm pretty OCD about driving in the middle of a traffic lane, and this car doesn't like to stay there, especially if there is any kind of wind. The steering wheel is tiny, heavy and sensitive, so being precise is a pain.
All that said, I actually don't hate it.
It's insanely roomy. The only dimension that's a bit tight is elbow room but even that's fine (and I'm a 6' 300 lb powerlifter). Like the OP, NO ONE ever believes me how much it can fit. If I'm proposing to put anything more than a coffee cup in the trunk, people laugh and say no way. Then I fit it with a Costco-sized weekly grocery trip and people just stand there with this "no E36 M3..." look.
At city speeds, it's drives just fine, and if you go downtown, it's a downright pleasure. While everyone else is fretting about how to squeeze somewhere, I can zip around and park like a bicyclist.
It's cute as hell. I dig being seen in it. I think I get a bonus inch or two on my perceived member size. My wife adores its herp derp appearance, which is probably gonna be the bottom line. The M3 is going to be her car, the Smart will be her jewellery.