It does add smoothness. Due to the cap, the frames are kind of synced in multiples with the refresh rate. My comment about 120hz was just to show that using a cap without vsync at 120hz makes even 60hz with vsync look juddery, which should look smooth due to vsync.
As for hit detection, as I said earlier you set update rates, packets etc to match your frame rates. This results in the best hit rego when there are updates to match every frame, or every second frame depending on the fps cap you use (125 or 250).
Like I said its not new, its common knowledge, I'm guessing you're a bit of a n00b with online gaming if you havent heard of it before, but thats fine I'm not knocking you, its just your inexperience shows.