There's something else going on because it appears there are additional splits being created. But I'm confused...you say you use the Smart tool when it turns into the transition icon (I assume you mean crossfade?) but then you say it turns into a slip edit icon. The slip edit icon will do what's shown in the "after" image, so I'm unclear as to when the cursor stops looking like the crossfade and starts looking like the slip edit.
Also remember two clips cannot overlap in the same take lane. If you move one so it overlaps the other then move the first one back, whatever portion was overlapped on the other clip will be gone.