[@Krot] Genjutsu is used through the senses, so it doesn't really have anything to do with 'touch' so much (okay, that one is one that you [b]can[/b] dodge because smoke is intangible) but more like sound, smell, taste, ummm, anything like that, and also chakra. 

Genjutsu comes forth from either senses or foreign chakra inside your own chakra paths. So if I inject chakra into you, you will still have my chakra inside of you despite being in a smoke form (because your chakrapaths still remain otherwise you'd die.. lol) 

Similarly unless your character literally has 0 senses while he's in his smoke form (can't see, can't hear, can't smell, can't breathe) he will always be susceptible to sensory based genjutsu. For example even in his smoke form he can see, therefore any genjutsu that begins with a motion (say, me snapping my fingers is the 'key') your character will see that and thus be affected by the genjutsu.

Because sensory genjutsu are 'easier' they are also less powerful (so for instance, switching left and right is something that can be done with a finger snap, but you can't cast a infinite tsukuyomi with a finger snap, logically.). Therefore what he is saying is that unless your character has 0 senses, and kills his chakra paths (and thus commits suicide) he will still be susceptible to genjutsu...

Genjutsu is fucking stupid and nobody really knows how it works, but this is the gist of it.