This is like the Coke or Pepsi debate. There's no "right" answer, just what works best for each smart owner. Personally, I drive in Auto (D) 99% of the time, using the paddles only when a quick downshift is needed for some extra acceleration (merging with traffic, coming out of a slow corner or a stoplight grand prix contest...)
After the first few days of driving in Auto I was having a hard time staying smooth when in traffic, so I started using the paddles for city driving. Every once in a while I would have to shift while turning and didn't have the patience to figure out that the right paddle is on the left when the steering wheel is rotated 180 degrees. I started using the floor shift now and love it! Once I'm over 20 mph though, it's back in Auto.
I use the auto mode most of the time, but since adding the paddle shifter kit from Matt Boesche, I am now enjoying the manual mode more. I wish our paddles were mounted on the steering column like some high dollar Italians, instead of turning with the steering wheel.
I love to use the paddle shifters. I usually use them around time to keep the shifting smoother. However, I also found them very useful when I was going through the mountains on my road trip. It made passing or getting out of the way much easier. I too wish they were on the column and did not turn with the steering wheel.
I'm interested in getting good mileage and I use auto almost all of the time. If I'm stuck in traffic and need to crawl along in first or second I may use manual to keep it there, otherwise I get along well with the smartshift computer. (no paddle shifters on either of my pure smarts)
I'm pretty much 70/30% auto/manual. Manual when I'm climbing grades for extended periods of time or in bumper to bumper traffic.
I'm known to also let the car coast on forward momentum at times while shifting to neutral, then back in gear, then back to neutral, etc during bumper to bumper traffic, or to save fuel coasting at offramps, downhill, etc,. I don't believe it's any secret by now that I'm a big fan of this transmission exactly as it was designed.
Most of my city driving is in automatic but mountain driving is manual with paddles, rarely do I use the manual floor shifter. I found the boesch built paddles better than the OEM though.
I try to restrain my finger dancing on the steering wheel when driving my Smart Passion...Sudden unexpected downshifts into manual are embarrassing... LOL