I can't think of a context in the US where 'smelly' is positive. It's synonymous with stinky. You're disagreeing with a bunch of Americans, so it makes sense they're not seeing your side here. If an adult said something was smelly, it does seem light-hearted but for young kids, it's about as insulting as you can get before getting into "bad words" territory (and by bad words, I mean child bad words. Like when I was 5 or 6 I said something was "stupid" and a classmate gasped in horror). Not for kids, I don't think.