smudge is a tool not a button, and to do that you can press F5 and the settings for brushes should come up. I hope somebody can take a screenshot for you.
http://img237.imageshack.us/img237/7114/untitled2uz6.png screenshot of were it is. its on CS, but i think its in the same place as CS2
Yea, the best tool for smudgining is either the defaults or an 'X' which you can make by oepning a new template (25x25 or so ) And putting the letter 'X' in it, then going to Edit-> Define Brush... lots of people do it in this manner, but I use the defaults.