Well, I gave it a test this afternoon on my 3 mile drive to, and then back from, the gym. This is in city traffic on one straight road the whole way. Stoplights every quarter mile at least.
First off, reading the manual (by the way, it's in the very first sentence of my first post that I had read the manual; so don't tell me to read the manual, okay? How about, read the post?

) is useless, mostly. The manual is at best confusing, and at worst, quite wrong.
Obviously, this is only based on a little bit of testing, and I'll have to play with it more, but this is how I think it works.
Press the "Cruise" button. (By the way, one of the hilarious problems with the manual is that it first takes you through "Cruise Control", then through "Smart Cruise Control", and only THEN tells you that "Smart Cruise Control" is on by default, and you have to do some jiujitsu [look it up if you're interested] to get it into "Cruise Control"). And also by the way, it goes back to "Smart Cruise Control" with a shut down/start up cycle.
Okay, so, I was stopped behind a car at a stoplight. Tried to turn it on to see if it would work at speed 0, as stated clearly in the manual.
Warning chime: conditions for Smart Cruise not achieved (or something like that).
My conclusion: No, it doesn't work from a standstill.
Start rolling, speed only a few miles an hour, car in front of me. Press Cruise again.
Now it says something like "Cruise Control engaged". Or maybe it says "Press Set or Resume up or down to start". I forget which.
Now you press that speed set button up or down (I think) and now the system is on and working.
Now you can push the distance button to set the following distance.
It seems the minimum speed you can set for it is 20 mph. (I tried setting a speed lower than 20 but it wouldn't let me set it below that.) There's a cruise speed indication in the dashboard. (Once again, manual is confusing or wrong based on your perspective; manual says it works from 0-120 mph with a car in front. I think I understand what this means now, but it's worded in a way that's... bad.)
However, the thing to understand -- of course -- is that if the car ahead of you is going 10 mph, then it follows that car, at your set distance, at 10 mph. (This is what is meant, I think, by the manual's statement that Smart Cruise works from 0-120).
The system successfully brought me to a full stop a couple of times behind the car in front of me. I'm not saying I wasn't scared and freaked out, because I was. But it worked.
As the manual says, if the car is stopped for more than 3 seconds, then you need to tap the gas pedal or push the speed set button up to make the car move again and continue following the car in front of you.
So there you go, for those of you interested in driving this car very slowly in a lot of traffic.