I'm using 50onred and was wondering if I upped my bid to using 'smart bid,' would the quality of my traffic increase along with the quantity?
You'd better try it, but don't do it on your main campaign (make a copy of it and compare your stats with previous campaign). I don't know for 50onred exactly, but your bid is also a "kind of targeting" in some networks. Since there can be different audiences for different level of bids and your CR may change from one audience to another.
Depends on traffic channel, but not necessarily.
Not sure about 50onRed but it's true on a lot banner sources.
By bidding high you get first impressions, so you target a fresher audience.
That translates many times to better traffic quality and conversion rates.