It can be done either way. Some guys have also plumbed it into the exhaust system so it burns off in there, but you need to angle the fitting correctly so it's not pushing boost pressure back in, but it scavenges instead.
It shouldn't... it really only has oil coming out. There shouldn't be any reason for smoke to be coming out of the CCV, unless you've got a ton of blow by or something.... Most just run a rubber line down and add a filter to the end of it.