Swype is application dependent. If you are in SMS, you will get smiley, if you are in email you will get Return key.
The reason is pretty simple, SMS messages were developed to be short, quick messages. The are typically written in one sentence, or not even a whole sentence. Paragraphs aren't used that much in SMS.
It's sort of similar to when people ask why they can't have more than 1160 characters for an SMS....because it's SMS (Short Message Service). If you need more than 160 characters, send an email. Same with this, I guess. They figure if you need a bunch of paragraphs, it should be an email, not an SMS.