The plugin does work. But there are limitations. And as you've pointed out it does not work well if the images are already uploaded.
Some things to check. Please go to Settings > Media. On this page you will see the Smush.it options. Set your timeout higher. I think the default is 60 second. Set the debug checkbox. This will at least provide some debug details for us to go on. Save the settings.
Now go to Media > Library. On this page select 1-3 image rows which have to been process. Set the checkbox in the first column. Then from the action menu drop down shown above the listing select the option for bulk smash.it. Click the button and see the debug output.
Please provide feedback.