I would have thought that XBMC used whichever DNS settings you stored in Android's Settings area, as I only see entries for entering a proxy server in XBMC, no DNS entries.
SmartDNS didn't work via Ethernet? I think it might be worth contacting their support team, explaining your situation, and seeing if they've come across this issue before. If you get a spare moment afterwards, could you post back any solution they offered, in case other forum members come across this problem in the future?