I would say that the key difference is that ERC20 tokens are claimed utility tokens, not actual. They don't have the features (fast and fee-less) nor the capabilities (decentralized distribution) to actually become useful for applications. SMTs will launch with these features and capabilities thereby immediately becoming useful so long as they are incorporated into a valuable application. In addition, Ethereum isn't built form the ground up to integrate with existing applications or new applications that use mature and rapid web development technologies. We already have multiple valuable applications running on Steem and SMTs will give them their own native currency whose price will reflect its value, regardless of whether they ICO. Finally, because all SMTs will have the option to leverage decentralized distribution, it's actually the only token launching protocol that isn't all about ICOs. In fact, I personally feel that the benefits for launching a token with only decentralized distribution (a/k/a proof of brain) are superior to ICO-ing. SMTs will offer ICO options because we integrate the feedback of entrepreneurs and developers, not because we are advocating for or against their use. Of course, time will tell on all of this, as with everything we do, it's really an experiment!
Great conversation and thanks for the response.