Part of the problem is the Smooth Stepper and THC300 (or any MACH THC for that matter) will not work right together. Too much delay on the inputs to form the closed loop that the THC needs with the Z axis.
If the UP and DOWN LED's in MACH are working and you have ARC OK then the only thing left is you don't have a licensed copy of MACH and/or the THC logic is not turned on. THC logic is disabled in the demo version. I don't know if it will work without the parallel port driver active, even IF you have a licensed copy..
You probably needed to discuss with your THC300 vendor how you intended to use it. It would have saved you a lot of frustration and about $150.00. I get several e-mails a month asking about using our THC's with the SS and I always respond with "it won't work".