Original Smalltalk was always "full screen" so it is strange to argue this way. Anyway, there are still Dolphin Smalltalk and Smallltalk/X (jv-branch) under active development that use OS windows manager. Pharo will allow working this way soon as well. On the other hand, it has own downsides if you work in multiple images at once and mix their windows together.
Yeah the original was, but many following that weren't "full screen". As I said it's a personal preference. I did hear that Pharo is working on something like that so I hope it will be implemented soon.
I thought that Dolphin was not developed anymore, that is nice to hear. I'll have to check it out again. Which of the two would you recommend?