I dont think smell is a factor in this game when it comes to sneak. I thought it was line of sight and the amount of light on your character
That is part of it. The other part is Sound. If they hear you, they can detect you.
Invisibility only adds to Stealth, it does not replace it. And, it only stops them from seeing you if you are not doing anything. Perform an action and the effect is removed. It is almost like it is to be used to stop someone from walking by seeing you while you are waiting for them to walk by.
It should work if you are moving around while Sneaking, but it does not seem to, at least the one time I tried it during a quest. However, my Sneak was not very good, but that is why I cast the spell.