I found this littel blurb in the "hard mache" recipe.
Tear up the paper by shredding it by hand in basic squares like this. Don't use scissors, but rip them instead - since when you cut them with a blade you shorten the fibers of the paper, thus shortening the strength of the fabric once it's mixed together.
This is just a WAG (wild a$$ guess), but it seems reasonable to assume that by tearing it, the paper seperates according to the weakest sections of fiber, which leaves you with chunks composed of strong sections. As opposed to cutting it where you just go straight through regardless of paper fiber strength on a very small level. Of course what you said about smoother transitions between sheets is probably a comparitively sound reason why the paper should be torn instead of cut, especially when a smooth surface is needed. I also found
this article on all the different items made with paper mache in different areas at different times.