[USER=62682]@zoe20[/USER] - Just for curiosity's sake, I went into your smart layer and using blend if, removed the white areas between the black lines:
Double-click on your layer zero to open the smart object. It will open as a separate document:
[ATTACH=full]122839[/ATTACH]
Double on the layer to open the blending options dialog - then on the top slider, begin to pull the arrows to the left slowly until white disappears:
[ATTACH=full]122840[/ATTACH]
Result - checkerboard pattern shows transparency:
[ATTACH=full]122841[/ATTACH]
Click OK and close the document - when dialog asks if you want to save changes, click "Yes"
*Any changes you made to the smart object will always be saved to the smart object in your master document
Now when you clip the top color layer to the layer below:
[ATTACH=full]122842[/ATTACH]
Hope this helps you to understand. You can repair what you have or start again. These kinds of speed bumps can be quite frustrating...everyone's run into them... 
- Jeff
