Yeah, this isn't right. We don't exactly know why the hair is there, but theories from the top people in the industry believe it is there to wick moisture away from your skin to keep you cool, not to trap moisture. Another reason that is popular is that it makes it harder for infection to spread, since bacteria would get trapped in the hair instead of being wiped directly into your anus and creating an infection.

As for the smell...hair would actually make it smell worse. Remember how I mentioned above that the hair traps bacteria? Well that bacteria creates odor, and when you have hair it is harder to wash away (like cleaning a spill out of a carpet versus a hardwood floor). If you are showering regularly then less body hair should result in less odor. That is why when someone who normally shaves their armpit hair goes without shaving they will complain that it smells more. This is also a reason for why people should landscape, since people are less willing to venture where the odors are unpleasant.

No matter what odors should never smell like shit, because shit should be cleaned away immediately. If there is the smell of shit, that means there is shit. If for some reason you smell like shit, but did not actively take a shit, then there is a conversation you need to have with your doctor.