Thanks everyone - I appreciate the feedback.
I absolutely don't want to tell anyone what they can do in their spare time, I couldn't care less if someone wants to smoke. In fact, one of the relief workers who spent a decent amount of time in the nursery when my bub was in that room was a smoker. I found out by accident one day (ran into her on a Saturday) and we chatted about it. She said she smoked in her breaks at work, but I never once picked up on it and I saw her often. I guess my point is that she obviously followed the practises you guys outline above, whereas the teacher in question may not.
It's such a fine line with child care though. They do such a wonderful job with my DD and as a working mum those fantastic ladies are the one thing that ease my guilt at her having to go. I would hate to do anything to offend anyone. Anyway, I'll suss it out and pick my moment and go from there.
Thanks again - appreciate the advice