I haven't gotten to the bottom of what's going on with IE and the BBC/Smileys buttons on the post form - but I have discovered something that makes the situation even stranger: all the smileys on the popup window (when you click the "more" link) DO work in IE. Apparently whatever is going on has to do specifically with the posting page and/or the BBC/Smileys routine on the posting page because otherwise the smileys on the popup window wouldn't work either.
Fill in the blank: "Roger and Liz instantly stopped dead in the tracks when they saw ________ in the drawing room (and it(he)(she)(they) was(were) even more hideous than they'd ever imagined)!!"
Fill in the blank: "Burke was shocked but intrigued when Joe propositioned him by asking if he'd like to ________ while they were in the woods alone together?!!"