Changing the smoothing angle did nothing. Unfortunately, I have figured out the problem. This is unfortunate because the only way I can think of to fix it is to rebuild the section. I was looking at the wireframe from the top-down view earlier when I saw the issue. It's all cockeyed back there, no two faces have the same angle. That's causing the faceted look, because it is faceted. I think I'm going to go back to my pre-cut hull layer and redo the cut, this time differently than what you say to do in the tutorial, so that it's a flat face back there. Once I have a flat face back there, I think the smoothing errors in the cut area will be history. Outside the cut should be OK too, because I'll be getting rid of a lot of those points that don't line up with verts.
I don't know how the heck yours looks so good and mine looks like crap, but it could be a difference in software versions. Though, if what I have in mind works, mine should look as good as yours.
