[dnanian]

Well, this specific case is covered in detail in the User's Guide, and it's also explained in the "What's going to happen?" section of the UI: Smart Update makes the destination exactly match the selections from the source, and it's just like an erase-then-copy, but faster.

As such, pretend you erased the drive and then copied your user files... and that's the result.

You should always use "Backup - all files". It won't copy files that haven't changed.