this is how i want SMS to be on hangouts. So, I am happy about it.
I want control over what and how it sends the message.
The problem isn't the control, the problem is how the messages are threaded.
Let's make a quick comparison.
In Windows Phone you can "Switch" between SMS and Facebook Chat in the Messaging Hub.
If you go into an area or building with no reception, you can switch to Facebook from SMS and send messages. The Messages appear in the same thread as the Facebook Chat Messages, so there is no break in the conversation flow.
In Hangouts, if you switch to from SMS to IM, then the IM goes to a separate conversation thread (AFAICT), and then when you switch back a whole portion of that conversation lives outside of the conversation. This makes it a compete and utter PITA to refer to earlier parts of the conversation because you can even forget which protocol was used during the earlier exchange.
This is not an issue in the Messaging hub. Everything remains in the same thread regardless of the protocol switch. Before Axing WLM, Microsoft supported three protocols there (SMS/MMS, Windows Live, and Facebook Chat) which could all be seamlessly switched between without breaking the thread up in this way.
It just looks a little sloppy, and it crowds the messaging list with redundant entries for the same contact - nevermind the conversation breaks within each thread as you switch from one to another. For example, if you don't want a Public Google Profile, you may send all your media via MMS to that contact instead of IM (Hangouts requires G+ for picture Sharing), but it would siphon all of that off to another conversation...
Since Google can match Phone Numbers to Google Accounts (they have been doing this for a while now with Hangouts, it's why they ask for verification), then there was no real roadblock for introducing a unified conversation thread for Hangouts and SMS.
Also, the lack of notification badges for Google Apps still makes the stock Messaging app a better choice. I prefer to see the counter for unread SMS/MMS messages on the icon. Hangouts doesn't do that.