prettyinpink, I don't use ice at all in my smoothies. Instead, I will slice up a banana and freeze the slices solid and put my yogurt in the freezer for about 30-45 min before i make it. Sometimes in the mornings I can't get the yogurt in the freezer in time to make it before I head out to work, but the fruit will freeze overnight w/o drying out or anything.
My blender doesn't really crush ice very well--same problems you mentioned. I used to whack the heck out of it with a rolling pin before I put it in the blender
, but I found that just freezing the things I'm using works better.