The downside is that Smashwords supplies a legion of sellers like B&N, Sony etc. I had B&N drop the price on one of my books without consulting me. Amazon matches the lowest price on the net so they notified me they were dropping the price. There was nothing whatsoever I could do about it.
If you want the higher royalty rate at Amazon, you must price at $2.99 or above. B&N comes along and drops the price to $1.99 and suddenly you're back at the 35% rate instead of 70%.
That's the real drawback. Besides being charged $10 for an ISBN which Amazon doesn't bother with using their own ASINs for free. It's a financial issue not technical. And I think Mark Coker is swell and Smashwords itself is lovely.