Hi Slaven,
That doesn't surprise me. SmartCombo is something I hacked together a long time ago (before the existence of MS AJAX) when there was nothing similar available. It was not designed to work with ajax and update panels. Probably there are now easier ways of doing what SmartCombo does. Its not a high priority for me to make this work in UpdatePanels. If you'd like to try and come up with a solution for it please do.
Best,
Joe