I am having two issues, and I'm not sure whether they are related or not:
1) As I started to run out of space on my hardrive, I selected SmartSync. I also have Selective Sync set so only a few of my folders are checked off. Somehow, when I open my Dropbox folder, I can see all of my folders...folders that were selected under Selective Sync have a green icon and give me the option of local vs. online only, while folders that re not selected under Selective Sync have a gray icon and only give me the option of online only. If I try to select additional folders under the Selective Sync option, I get a duplicated folder with "(Selective Sync conflict)", and then I am stuck trying to merge them and delete the duplicated folder How do I prevent this from happening?
2) Files that are not selected under "Selective Sync", although they show up as "Online only", do not appear to be updated. Is this because they were not selected under "Selective sync?"
You mentioned that you're getting selective sync conflicts. This is caused by selecting folders not to sync via the selective sync settings, then creating a folder with the same name in the same location as the unsynced folder. Choosing to then sync the folder again causes the selective sync conflict folder.
The grey icon that you mentioned, is this a grey minus icon? If so, these folders are not syncing to your account and you will need to check them in the selective sync setting and consolidate them as you did previously.
Finally, once the issue with selective sync has been resolved and your app shows it's "up to date", you can then ensure that the files that are on your hard drive are smart synced. Any folders/files showing the green tick are local, and you can make them "online only" by right clicking them and choosing "Smart sync - online only".
I hope this helps, let me know if you have any other questions!