I'm back on emacs after a couple of (fun) months with vim, and one of the things I miss is smooth scrolling in terminal. Enabling mouse in vim is enough for the scrolling to work pretty great in iterm2, while in emacs (also in iterm2) even after numerous hacks and trial and error I'm still not happy with the result.
Are you using OS X / mac OS? If so, have you tried Mitsuharu Yamamoto's Emacs Mac Port? Available as Homebrew tap: https://github.com/railwaycat/homebrew-emacsmacport