Setting is true, yet when I put :) into a post, that's exactly how it appears in the published post.
I'm not a huge fan of smilies, so it's no problem (I'm still playing with the program and learning how things work) but in case it's not just me, I figured someone needed to know ?
You need to enable them in your options, it's under General Blog Settings.
I did.
use_smilies is set to true
podz - try a :( or a :D smilie
I don't get an image for :) as well but for the other types I do get the smilie.
If you put just :) as a post, it will not get translated. There has to be some text before the smilie.