Yup, as has been said, you have two problems. Harmony Remote and IR distribution. Harmonies are glorified toys that are only for do it yourselfers. You see why most integrators won't use them. They flat out don't work. Second, IR distribution is flaky at best. Always has been, especially with flat panels and rooms with light. :)

YOu need to bite the bullet and remove the Harmony, replace it with an RTI remote with processor (or use URC remote/processor, but I owuld go RTI). It will cost you $1500-2000 US dollars to do it, but you wil have a happy customer and you wil net 25k pounds. Sucks to have to eat the cost of the RTI, but maybe you can sel the Harmny on fleabay for 50 bucks.

BTW, I don't know anything about the Smart-e matrix switch, but it isn't at fault here in any way most likely. It is your remote.