The ‘segments’ option is what you are looking for to make the hair smoother. In 2.4x it was under the basic panel, not sure about 2.5, but I’m sure it’s around there somewhere.
For the thickness of the hair you’ll have to look in the materials panel. Assign your hair a material and then play with the ‘Strand’ settings. There are boxes there for the start (root) and end (tip) and also the shape. These will all effect the individual hair thickness. Hair looks nice when you start thick and end it thinner!
I’m still playing around with the smoothness, I can’t believe the steps is the only way.
even with long curly hair steps of 7 to 9 should be more than enough. I guess you know that the steps in the Render tab won’t change what you see in the 3d view. For that you need to change the steps in the Display tab.