hi
first of all: if you think that something is not working properly, file a bug and report here the reference for other readers.
anyway, as SME is CentOS based, you can always re-create the same setup for syslogd creating the proper template fragments in the right folder (in this case /etc/e-smith/templates-custom/etc/syslog.conf IIRC)
if you don't know what a template is, I suggest you to read the dev manual.. 
Ciao
Stefano
I've created a template to send syslog message to remote server, but it has nothing to do with this issue.
CentOS syslog.conf entry has:
authpriv.* /var/log/secure
SME syslog.conf entry has:
authpriv.* /var/log/secure
This is not something I can solve with templates, entries are the same already. So issue is not in syslog (proftpd errors will get logged in /var/log/secure, for example).
Because I haven't seen this mentioned in bugzilla, nor as an issue on forums, I wanted to check if I am doing something wrong before calling it a 'bug'.