Smartpricing - How flawed is it?

Most of us agree that the smartpricing algo works on the basis of the likelyhood or the expectation of a conversion. So how is this mysterious algo expected to work effectively in the following hypothetical niche, keeping in mind that although the niche is hypothetical the actual scenario is not.

Publisher has a site selling quality consumer, prosumer and professional digital cameras alongside adsense advertisments. The adsense ads displayed on said publisher's site are largely comprised of the following:

*Review sites about digital cameras
*Review sites with affiliate ads about digital cameras
*Generic Ads pointing to sites such as Ebay, Target or Megasearch etc.
*The occasional off-target ads about industrial products.
*Shopping sites whos landing page may carry everything from keychains, keychain cameras to banana lounges.
*MFAs with nothing but ads: Consider that MFAs ads may or may not be targeted well or may contain more MFA's, general advertisers etc.

I think that if Google can’t always get their advertiser quality control or targeting right, then samrtpricing really has no way of working effectively as in many cases it doesn’t really know what actually is the desired outcome in many cases.