Yes, your summary of my thoughts are accurate.
Regarding this, a niggle at moment is the only death in timescale of a Margaret Smallwoods was not in Londonderry area, albeit in neighbouring area, so not impossible.
Also, an update on thoughts re Isabella Bovaird Smallwoods:-
Yes, agree, I did wonder would a mum be happy having her child given the middle name which was surname of her hubby's first wife. So, thinking cap on, and other possible scenario is:
1)The Bella Smallwoods you have at 1901 was indeed Anabella b 1882 and is therefore possibly the Bella Smallwoods who died in Londonderry in 1908 (albeit birth year given as 1889).
2) Remembering my comment that Joseph Smallwoods and Margaret Bovaird had children....one such was William Smallwoods born 1860....possibly the same William seen here at 1901
http://www.census.nationalarchives.ie/pages/1901/Londonderry/Waterside/Lismacarrol/1539434/and including a daughter Isabel aged 11. This Isabel was born in Londonderry in 1889, with no obvious middle name indicated on familysearch, so her birth year fits better with the 1908 death, but, If this William was the son of Joseph and Margaret, then this Isabel could quite possibly have been given the middle name Bovaird, perhaps when christened. Certainly, if she was not the Bella who died in 1908, she would have been of a marrying age in 1909, when Isabella Bovaird Smallwoods married. Interestingly, you will note that this William was a Shoemaker. But, by 1911
http://www.census.nationalarchives.ie/pages/1911/Londonderry/Waterside/Drumahoe/605581/ this family group show that they had 11 children born and only 8 still living.....all 8 are still at home......no Isabel.....which again, given her birth year of 1889, points to her as having been the Bella who died in 1908.....just to keep things confused.
So, is Isabella Bovaird Hamilton (nee Smallwoods) naming her daughter Elizabeth Simpson Smallwoods a red herring perhaps...the jury is still out on this at moment.