I think the issue is with discrete (line-at-a-time) vs. smooth (pixel-at-a-time) scrolling. Two-finger scrolling typically sends the latter type of event, which is not yet widely supported in Windows and Linux software (although I have it working on my thinkpad X121e with the latest gtk3).

I thought the "smoothing" was done entirely in software because my old genius mouse wheel behaviour changes according to firefox "smooth scrolling" setting.

It still seems weird to me that if the smooth (pixel-at-a-time) event is sent two-fingers scrolling fails while a mouse doesn't. The OS or the application is accepting pixel-at-a-time event and fails or succeeds regardless of the originating device (mouse, touchpad, wacom, etc.).