Well, if there's going to be a debate/arguement I might as well toss in my two cents.
Firstly, the 'technical advantage' this offers over a controller is two fold. Firstly a mouse is simply more accurate than a controller. The evidence of this is found in Halo 2 itself, the aim assist feature that is present here and in Halo are there for the reason that with a controller you kind of need it. It's this aim assist that gives the SmartJoy it's second advantage. Have you ever played a game, let's say Half-Life or Counter-Strike. Do the multiplayer servers have aim assist enabled? Not many serious servers would, since most would feel it takes the emphasis off of your own skill with regard to aiming, after all, you are using a mouse. With this in mind you might liken using the SmartJoy in Halo 2 to going to a Counter-Strike server that doesn't allow Aim Assist but one guy by whatever techno magic you prefer to imagine has it anyway. I'm relatively sure you'd take issue if you ran into someone like that.
Ok, with that aside we'll adress some other statements.
Saying that this is like having a wheel for driving games isn't a very good analogy. First off, I personally prefer a controller to a wheel. Secondly driving games don't to my knowledge have some sort of steer-assist feature that a wheel would take sort of a double advantage with. Thirdly, driving games you could argue were INTENDED to be used with a wheel, after all you don't go into an arcade and find a bunch of dual shocks sticking out of the machines.
The fact that there is a turn limit in Halo 2, just as there was in the first doesn't somehow mean all other points are invalid. Sure, a guy may still have that increased advantage coming up from behind but in a face to face encounter, the aim assist and the mouses' natural advantage with accuracy and perhaps smoothness clearly has an advantage. That's not to say a controller player will lose every time, but it certainly doesn't help him nor does it hurt the SmartJoy user.
I think part of this thread was to determine if the SmartJoy is something to use in competitive play. So in answer to that I'm willing to accept that nothing can be done about the XBoxLive situation, it's just something people have to deal with. However in actual tournaments that you have at you college, local gamestore or wherever, you can actively and effectively police this sort of thing, and I for one would vote against allowing the SmartJoy. If you want mouse use, I'm positive we'll see Halo 2 on the PC, you can spin your track ball all you want then, and don't act like there haven't been PC games that console users have had to wait for.