both huber's and diehl are great shops, each well worth a visit. i especially liked huber's. there are a couple of others i've been to as well, but honestly they didn't leave a very large impression.
unfortunately there are few places in munich where it's still legal to smoke indoors. a couple of the very high end hotels have smoking lounges (the mandarin oriental is one, and the vier jahreszeiten; the latter has a tiny smoking room off the lobby on the same side as the check-in counter), and there's a pusser's bar which has a third floor small parties can rent to smoke, but almost all of the venues that existed a few years ago are now nonsmoking.
pipes aside (and i know that's a scandalous way to begin a sentence), munich is one hell of a town, and has many things worth seeing and doing. the food alone is a blast, if not exactly healthy by modern standards. if you don't get a schnitzel (go for the veal, not the pork) and a weissbier you've wasted an opportunity. there are countless great restaurants; for traditional german food and a historic atmosphere the alter simpl is fun. and of course the beer halls are a great experience; the large ones are pretty touristy, but there are many smaller ones all over town.
and if you're ever back in munich during nice weather, there are more beautiful beer gardens than you would believe.