This meme of poor formatting is a myth. Smashwords has stricter formatting requirements than most of our retailers.
A few weeks ago we launched our new Smashwords Direct feature, which is now in beta. Ironically, many of the "hand-crafted" epubs we're receiving are failing epubcheck, or failing other validation required by Apple, which has stricter epub construction requirements than other retailers. Books produced by our Meatgrinder conversion system don't have those problems.
Also as a reminder, authors format books, not Meatgrinder. If an author follows our Style Guide, they'll get good, predictable results. Before we distribute a book to retailers, our vetting team opens each book and reviews the epub for proper formatting and function.
Yes, there are poorly formatted books on Smashwords, but they're likely not books that are earning distribution, or they're recently uploaded books where the author is still working through corrections. If a customer complains to us that a book they purchased is poorly formatted, we'll work with the author to correct the issue and if the author refuses or is unable to repair, we'll refund the purchase price.
One of the earlier commenters asked about description lengths. Two years ago (January 11, 2011), we increased the book description lengths to 4,000 characters. Authors have the option to create both short descriptions (used for Smashwords store merchandising) or long descriptions (distributed to our retail partners and also used at the Smashwords store). thanks.