Well, when i say "solved", i mean i have a work around till we get the 2.0 next week.
Basically, everytime you save, the default version of the file gets saved instead of the mofifications you are trying to make. The solution for now is to NEVER click the save button. Instead, maually edit /administrator/components/com_smf/config.smf.php and FTP to update.
To get you started, here is my file (below), which works just fine. Be sure to change the following variables:
$smf_path
$mosurl (you'll need to actually make a menu item pointing to the smf component to figure this out before procedding).
Once you have it up and running, modify the settings MANUALLY until you get it the way you want. Everything thing is '1' or '0' except for $registration_module (smf|joomla|cb|cbe) and $login_module (mod_smf_login|mod_login|mod_cblogin|mod_cbelogin) [options separated by the pipe | ].
<?php
global $smf_path, $smf_redirect, $joomla_redirect, $smf_prefix, $mos_prefix;
global $wrapped, $sync_uname, $hideemail, $cbprofile, $registration_module, $login_module, $mosurl;
global $announce_url, $news_url, $latest_joomlasmf_url;
$smf_path = "/home/user/www/smf_forums";
$smf_redirect = "0";
$joomla_redirect = "0";
$mos_prefix = "jos_";
$smf_prefix = "smf_";
$wrapped = "1";
$sync_uname = "1";
$hideemail = "1";
$cbprofile = 0;
$registration_module = "smf";
$login_module = "mod_smf_login";
$mosurl = "http://your.domain.com/index.php?option=com_smf&Itemid=40&";
$jsmf_debug = "0";
//The following are used for the syndication feed
$announce_url = "http://www.joomlahacks.com/news/mh_announcement.rdf";
$news_url = "http://www.joomlahacks.com/index2.php?option=com_rss&feed=RSS1.0&no_html=ss1";
$latest_joomlasmf_url = "http://www.joomlahacks.com/news/mh_mambo_smf_update.rdf";
?>