I had the same problem. Turns out, the Layer 2 scrolling rate must be set to H-Scroll: Constant, V-Scroll: None.
I'm not really sure why, as my level didn't have vertical scrolling enabled anyway, but I guess that's how it's coded.
I just found a post
with a nice list of Layer 2 command descriptions. It'll tell you what screens to use for the Layer 2 Smash commands.