The first time I heard 'Are you trying to blow smoke up my ass?' was in this context:
Drill Sergeant: What's wrong with you private? You failed to accomplish a simple task! Why?!
Private: I thought you said, "place all open liquids in the trash can," Drill Sergeant.
Drill Sergeant: (holding a green plastic bottle at eye level) What is this, Private?
Private: Shampoo, Drill Sergeant.
Drill Sergeant: Is it a half-empty bottle of shampoo, Private?
Private: Yes sir.
Drill Sergeant: WHAT?
Private: Yes... Drill Sergeant!
Drill Sergeant: Why is it not in the can, Private?
Private: Because it's... I didn't think it was... liquid.
Drill Sergeant: Is it a gas?
Private: (starts to shake his head) N...
Drill Sergeant: Is it SOLID?
Private: (still shaking his head) no...
Drill Sergeant: Then what?!
Private: A.. a.. gel. Drill Sergeant.
Drill Sergeant: Are you trying to blow smoke up my ass?
Private: n... No, Drill Sergeant.
Drill Sergeant: (twisting the top off of the bottle) cup your hands in front of you, Private.
(At this point the Private placed his cupped palms together in front of his belt.)
Drill Sergeant: (peering closely at the side and front of the Private's face as if he were looking for the smallest flaw, or eye movement, or shift from the position of attention) PALMS UP! Are you an idiot, Private?
Private: No, Drill Sergeant!
Drill Sergeant: (tipping the bottle over the Private's hands) We. Will. See. Private. We will see.
(At this point the shampoo began to ooze out of the bottle and coat the Private's hands.)
Drill Sergeant: Does this feel like a glob of gel has fallen into your hands? Or. Does this feel like a liquid is pouring into your hands?
Private: A.. a liquid. Drill Sergeant. Sorry, Drill Sergeant.
Drill Sergeant: So you were trying to blow smoke up my ass, weren't you?
Private: No Drill Sergeant.
Drill Sergeant: (pointing) Go in that latrine. Wash the liquid soap off your hands. And get back in my formation. You have thirty seconds. GO!
(At this point the Drill Sergeant handed the bottle and cap to another Private in our formation and directed him to dispose of the bottle and return to the formation.)
Drill Sergeant: It appears that my instructions were unclear. ALL liquids are prohibited in my barracks. All medications OF ANY KIND are prohibited in my barracks. I asked if there were questions, got none, and - yet - I still found a liquid. On the command of move, you all will have another FULL MINUTE to search your belongings for liquids and medicines, dispose of them in the center trash bin, and return to the position of attention in formation. MOVE!!
(At this point some soldiers began to scramble again and more bottles of various types were thrown away. The Private returned from the latrine and the Drill Sergeant began to holler at him about the mess he made by dripping shampoo on the floor and the latrine door. The private then wiped up the drips with paper towels.)
Drill Sergeant: (over the sound of the Private counting off his push-ups) You ALL better be back in my formation by NOW! If I find ONE more liquid, or ANY medicine of ANY kind, that means you're ALL blowing smoke up my ASS!
(Three duffle bags later he found a small bottle of saline solution for soft contacts. We all began to do push ups, until it was time to do squat-thrusts, until it was time to do wish-bones, until it was time to do more push-ups.)
It is nice to know the (supposedly true) origin of the phrase. I must admit I find it difficult to take this explanation 100% seriously; even after seeing the actual device and seeing the old drawings. It's too easy to fabricate an item and fake the explanation for me to swallow anything this far fetched hook-line-and-sinker (as it were).
I have used the phrase in it's bastardized form of either "I-think-you-are-being-less-than-truthful" as well as "Stop-using-foolishly-overt-flattery-because-it-isn't-working".
Until today, if someone were to tell me about an old British custom of reviving drowned people by blowing smoke up their ass...I would have replied: "Do you believe it was a real custom? If so, I think you are blowing smoke up my ass."
But—ever willing to play devil's advocate—why be so positive it doesn't work? Just because it sounds like a bag of leeches?
I've heard about butt-chugging. I've read how Marlyn Monroe insured her last suicide attempt was successful. Is it possible that a gust of nicotine absorbed through the rectum will cause someone who just inhaled a few cups of water to violently cough?