I'm not a big fan of serialised work, either - DESPITE the fact that I usually serialise my work - to a point - on my fiction blog. DR's points above are ones I pretty much agree with. I've read a lot of serial fiction. My two favourites ground to a screaming halt last year
So I've pretty much given up.
Here's the thing, though - I know there are a good number of people who DO like serialised fiction. The one thing Smashwords could offer that no other company seems to be offering (to writers outside the US!) is an opportunity for writers to offer serialised work
and get paid for it as they go. If the writer doesn't want payment, there are multiple OTHER options out there, most of which include an RSS feed so that readers easily find out about new updates.
If Smashwords wanted to go this way, I'd suggest a separate classification for serial works, with separate listings and automatic non-inclusion in the premium catalog (although it might be interesting to put out a monthly 'ezine' including all the latest serial fic).