Oh, nevermind that. It was just the lack of quality of a test render. It looks smoooooooth with better qualities :]
However smoke displacement only looks too uniform.. I guess I will have to do something with particles like you suggested.
Here is a little screenshot I took. You might be able to grasp the concept of what I am aiming at here, hehe. Inspired by lotr fellowship of the ring - that movie had a well composited scene in it which I am trying to mimic here.
http://img112.imageshack.us/img112/8...ingtestnd9.jpg