Any spaces within one space of the token block line of sight for Hunters. The only exception to this that I see is if the Agent and Hunter share the same space, in that case the Agent would still be visible.
The Hunter in your example was "within" the cloud (radius) of the Smoke Grenade. His vision is blocked until he moves out of that cloud.
You are spot on. A hunter within the area of the smoke grenade can only see the space they are in.