It's really hard to get your head around her for a couple of reasons, first we're never given any real time inside her head. She's a side character, and there's a lot going on in there for a side character. Second, I think most people miss how incredibly dishonest most of what she shows the world is. She is utterly miserable and terrified, almost all of the time. This is not mutually exclusive with smiling. Smiling is a mask that keeps Azula's suspicions off her, and probably one she has no idea how to take off anymore. Also, she lies. She had to lie to Azula to survive, and keep her happy, so during the show, most what we hear her say to Azula is a lie. She also lies to herself. When you live with someone like Azula, it's safest to just let their lies become the truth for you. It makes you more miserable, but it keeps them from getting angry. Her lies aren't malicious. Her reaction to Azula was to become an extreme people pleaser, and her lies are in the service of pleasing others. It's still really unhealthy, and very damaging to any relationship she tries to build, and she's probably in for a nasty reckoning down the road.