There should be no problem with the cabling approach you describe, Jeff. And I think that once you get a chance to try some manual EQ adjustment, you'll be pleased with what the SMS-1 will let you do. Ask away as you start setting it up - several of us around here have spent some quality time with the SMS-1 now and can help you along.

Your crossover selection certainly does seem to be the best fit for your system. Since you'll be letting the subs handle all of the LFE track, you might want to temporarily bump your crossover up to 80 or even 120Hz when EQ'ing the subs - that way you can flatten the subs' response with LFE channel signals that extend beyond the 40Hz crossover point as well as with low-pass data under 40Hz that is redirected from your full-range channels. Afterward, you could pop the crossover back down to 40Hz. If you are looking for a quick approach to setup, the "Self EQ" approach (triggered by hitting "3-2-1" on the remote) will do something very similar to this because it adjusts the EQ by sending the test tone sweeps straight to the sub (bypassing the processor's bass management) - so it'll flatten your subs' response from 20Hz to 100Hz (the default positions for the EQ's).