You are building your application with Qt 4.7 (and eventually Qt Mobility 1.1) but one of the stated limitations of the SDK is that Ovi Store distribution is not possible at the moment and as such there is no need for the smart installer. The Smart Installer itself does not support the Qt 4.7 and Qt Mobility packages (as you can see from
http://tinyurl.com/SmartInstaller) and in Qt Creator 2.1-rc1 you can already generate smart installer packages without command line tools.
All this is resumed in an existing bug report at
http://bugreports.qt.nokia.com/browse/QTCREATORBUG-3624 and we're told it should be fixed in the next SDK release.
If you are not using Qt Mobility, and as a result the error message makes no sense to you, that is caused by a bug in Smart Installer, already reported as well.
As for a solution: don't use Smart Installer until you are close to being ready with your project and full support for Qt 4.7 is announced by Nokia. Instead, install Qt and Qt Webkit on your device and then run the app from the IDE, it will be installed automatically and run on device.