I have a 2005 M3 with SMG, and the "Auto/D" mode (and I am using the auto word incredibly loosely) is absolutely horrific. You are right, it shifts like a 16 year old trying a stick shift for the first time. For the first 2-3 months after getting my SMG, I kept trying "Auto" mode in various aggressive modes, with and without the Sport button, letting up slightly on the gas between shifts, etc, etc. It is basically pure shit. The only time I use the "Auto" mode, is when I am in really bad, bumper to bumper traffic, and then the rough shift from 1st to 2nd, is not bad at all with slow speeds. Shifting it via the steering wheel paddles, or the hand shifter gives precise, lightning fast and perfect shifts from 1-6, and I almost always let it downshift by itsellf. I also found that using the Sport button makes everything feel better, and I personally like driving mode 3 or 4 (the little button by the hand shifter).
Don't bother taking it to the dealer...Nothing is "wrong" with your SMG. It is just, well...SMG.