Why would you be surprised that you still have input lag if you use the exact same TV? The TV is the cause of lag. With the OSSC you will only remove deinterlace lag which should be around 1 frame.
If with motion smoothing you mean motion blur then its probably that you are playing a 50Hz game. I see much more motion blur on my TV if I play at 50Hz compared to 60Hz.
With 240p/480i passthrough the OSSC outputs double the horizontal resolution (1440) so a double width image is expected with 1:1 scaling.