Smoked Paprika found in stores is prepared from a Spanish (sometimes Hungarian) pimento pepper which is smoked whole as part of the drying process. The peppers are pulverized to create the end result.
Smoking the powder (never tried it) would tend to vaporize the essential oils, thereby minimizing the flavor and possibly creating a bitter flavor.
It can't hurt to experiment but I'd use the lowest possible heat setting needed to produce smoke.