Regrettably, the whole "non-smoking from 1 January" thing has become a bit of a joke. Some bars were a bit slow to get their paperwork in, but now there seem to be very few honourable exceptions to the "cop-out" exemption.
One of the best I know of is Bulldog's
http://www.bulldogsbarandgrill.com They have bands from time to time; quiz nights on Tuesdays (win $1000!); sports also on the screens when the big events are on.
I believe that Stormy Weather in LKF is also still non-smoking. As are Wooloomooloo at the top of LKF, and a number of the better bars along Wyndham Street (Tivo, Divino,...)
Staunton's in SoHo also appears not to have an exemption, which is great.
The best for live (jazz) music is probably the basement bar at the FCC, but you need to know someone who is a member there in order to be able to buy (very cheap) drinks.
http://www.fcchk.org