I have also had similar issues trying my dangdest to get C to do smoke and clouds.  Bottom line, C has limits.

In terms of generating clouds in the sky, Terragen 2 can body slam that problem pretty dang heavy duty.  I've not tried Vue yet.  Lots of reasons, mostly I just don't want to learn another package (maybe when I'm old enough).

The volumetric clouds in C are actually pretty spiffy but they take time to setup and they also have limits (I haven't found a way to do small ones for localized smoke yet).  If you work with the C clouds, they can actually generate some really nice results.  You just have to pay for it in render time and setup time.

Simulated Cumulus clouds are one big leap for C at the moment.  What I don't get is that there are clearly algorithms out there for super nice clouds that I wish we could have in C.  The other packages are keeping that stuff secret since it's a pretty big competitive advantage.

And in the end, localized smoke effects are probably best done with flip boards like Mark says.  I've been fussing with all kinds of weird ideas for smoke for the last six months and I can't get the code to crunch out anything that looks decent yet.

And last but not least, I'll side with Mark again saying that good smoke and clouds can probably can be done.  We just need somebody to come up with a cool way to do it that we haven't thought of yet.  Even now as I write this thread, I'm thinking of a couple of ideas to try.

-Kix