she might have been based on the same real-life character - Madame St. Quentin, French speaking 'mainstay' of the school at reading Abbey that Jane and Cassandra went to in the 1780's, and in 1814, next door neighbour to Henry Austen, at 23 Hans Placeš.

The history of Madame St. Quentin was (according to a Mrs. Sherwood, in The Life of Mrs. Sherwood) "She was left an orphan in childhood, and was educated by an uncle, an old bachelor, a man of large fortune at Berkhampstead. Madame was reared in ease and gaiety, under the expectation of being the heiress of her indulgent uncle; and in this character she had been a parlour-boarder at the Abbey at Reading, then kept by a Mrs. Latournelle and another lady...she was of full age when her uncle died, and instead of making her his heiress he left all he had to a housekeeper. At this crisis she became a partner with Mrs. Latournelle...and the two together carried on the Establishment for a short tie with success...Monsieur St. Q**** was recommended to teach French at the Abbey: not long after this he married the younger partner of the school, and very soon so entirely raised the credit of the seminary that, when I went there, there were about sixty girls under her charge."˛ (2)

One of the many things I like about Mrs Smith, is that she knits. Miss Austen's ladies trim bonnets, paint china, net cloaks, work fillagree, embroider, sew and make fringe - but Mrs Smith is the only Lady that knits. Perhaps it was too much like a working class occupation, hence being carried on for money and taught by a woman who earns her own living. (Still, if nursing without pay was an acceptable occupation for ladies like Mrs Harville, I wouldn't be shocked if it turned out that in the long watches of the night she not only darned her families stockings, but knitted them gratis,too).

At first I thought that Mrs Smith was knitting with wool - but looking around for thread cases, pin cushions and card racks (on the net), I am convinced that she was doing very fine work using cotton, or silk. At the time, silk was in short supply (due to the recent war with France), but if anyone had the contacts to obtain something it would be Mrs Smith, so maybe the high priced things she had in stock were silk.
I couldn't see a knitted card rack, but this ivory one has the look of the knitted cotton lace look that was just coming into fashion, so maybe her card cases were board or paper-mache covered in white-work.
We still have pincushions and thread cases, but not so fine as this. How a person could work so fine, so close, so tightly and lightly, and find it amusing? (She must really have been desperate for the money, or amusement).

And I found this great link - Mara Riley's research and patterns for 18th and 19th century hand knitting.