Yeah it does suck.
The user authentication does work, but only if you set the HTTP proxy to non-transparent mode and set the default policy to "authorize".
In that way at least http traffic (web browsing) uses authorization. It is not meant for traffic on other ports, that still goes through without authorization.
If you are looking for something like hotspot, the best you can do for now is put an access point on your network with DD-WRT firmware. It includes a hotspot with captive portal.
You can't really compare Smoothwall to Zentyal.
Zentyal is so much more complete and is more like a SBS.
If you don't need all the features Zentyal offers, in that case your best shot would be Pfsense 2.0 or Zeroshell.
Cheers.