I can't tell you exactly how it works, but notifications do come through when wifi is enabled (and connected) and cellular data disabled even when the phone is locked.
I had an iPad which was WiFi only and notifications managed to go through anyways, so I'm guessing we're -I am- missing something on this "wifi sleep" thing.
Not something I've ever thought of before, but I would guess that the radios cycle during that "sleep" time and Smart3G stays on top of it.
In any case, I've not missed notifications and battery life has been good.
I'm not always using this tweak though. I got it partly to rid myself of the annoyance of always having to turn WiFi on.
Now that Sprint has LTE in my areas, turning WiFi on isn't such a big deal anymore (I have an unlimited, unthrottled, unmetered plan).
Well, I have LTE too, but even 3G is faster than my wifi. I guess the advantage for this tweak is battery life. At least that's the reason why I'm considering it. Using LTE is way faster, but it's also much power consuming, mainly if you have 3 bars or less.
That's why I was asking about battery life. Maybe you've used it for so long that can't really remember, just wanted to know if it impacted your battery life in a noticeable way, i.e. 20% at least.