1) With SMG there is no reson to do this. I don't think you will hurt anything, but there is absolutely no reason to do so.
2) In S mode, the SMG downshifts so that if you were to forget and just step on the gas, you will not hurt the engine by lugging it. That is ALL.
You can downshift at any time, or not as you feel like doing.
Where you are putting it in neutral, I just gently stop, letting the SMG downshift as needed. If I think I will be going before stopping (light getting ready to change) I will downshift myself to be in an appropriate gear for the acceleration. remember SMG only selects a lower gear based on excessively low revs, NOT for performance in any mode.
Realise how SMG downshifts and upshifts is not only determined by the mode slection. SMG will downshift more quickly under HEAVY braking, or with a bit of throttle. So either get on the brakes HARD, or do a bit of heel and toe, giving the throttle a little blip at the right time. The amount of blip doesn't matter, as the SMG will supply the proper rev match. You just need non-idle throttle to cue the system for a more prompt downshift.
For upshifts, similar. A little lift as you shift will smooth out the shifts totally.
I run exclusively in S5 (except on the track, then S6). For normal putting about, a lift on upshift makes them as smooth as can be, but I have instant shifts available instantly also. For downshifts, I like the system do its calm downshift off throttle, unless I am starting to drive spirited, then the little heel and toe gives a nice rev matched downshift.
Realise that the blip (downshift) and lift (upshift) will tke practice to develop the proper timing.
'95 Alpine M3 LTW
'00 Dakar M Roadster
'02 Topaz M3
Red/White SRF #4 (Chassis 561)