Objection: a properly-designed compost pile doesn't smell bad. Only if the right balance between carbon-rich and nitrogen-rich materials isn't met, and there's too much nitrogen, will noxious substances be produced.
A skilled composter ought to be able to manage a pile without producing miasmas, and even a poorly-managed compost heap ought not to smell too bad.
True, but I'm mainly thinking of gameplay balance. Ideally, and with modern techniques, there's absolutely no reason not to compost. In-game, though, there should probably be a valid reason not to.
Modern composting only started in about 1920. Up until then, it was mainly just heaping stuff up and letting it sit for a year or more, which is obviously inefficient in many ways. How much would that smell compared to a modern compost pile? I don't know, and I don't really want to pile up junk to find out.
Also, I'm fairly sure that meat and animal corpses aren't generally added to modern compost, as it's much more efficient to render those down into bonemeal, fat, and protein. I would imagine that the countless dead rats, lizards, fluffy wamblers, goblin chunks, etc., in a dwarven compost heap would make it much more pungent than a modern human one. The option to not compost small animal remains should probably cut miasma down to nothing.
Also, it'd probably smell a whole lot worse in a confined space, and the piles should follow the same miasma-generation rules as everything else. An outdoor compost pile doesn't stink (though it may lose some nutrients over time, due to rain, etc.), an indoor one does.