It looks like the S/MIME settings (activate/prefer) are ignored:

• Regardless of activation, decryption seems to work and pinentry shows up for the smime key
• Regardless of preference, openpgp keys are used

To reproduce the activation issue:

1. Deactivate smime
2. Kill background processes and restart Outlook
3. Open a smime mail => pinentry shows up and mail is decrypted

To reproduce the preference issue:

1. Make sure you have both secret openpgp and smime certs (I tested with ted)
2. Deactivate "Always show security approval dialog"
3. Activate "Prefer S/MIME"
4. Kill background processes and restart Outlook (just to be sure)
5. Send an encrypted/signed mail => always openpgp encrypted/signed

Note: I had both secret openpgp and smime keys of ted/edward in keyring and both accounts in outlook added, if that matters