Whatever happened back then in November 2, when the Gmail Labs Team pulled off the SMS text messaging for chat feature in Gmail, it took them more than the promised 2 weeks to solve the "snags"/bugs in it.
Leo Dirac, Product Manager at Google said in Gmail Blog: "A few weeks back, we ran into a few snags when we first started rolling this out, but starting today you can turn on text messaging for chat. Just click on Settings, and go to the Labs tab. Scroll down until you see 'Text Messaging (SMS) in Chat' and select Enable and Save Changes."
But unfortunately, this new text messaging in chat feature is only available for mobile phones in the states: "We're just trying it out for cell phones in the United States right now, but you can send texts to your friends with US phone numbers from anywhere in the world."
On the receiving end, when you get a text message from Gmail on your phone, it will come from a number in the 406 area code. You can reply to this text on your phone just like you'd reply to any other text. The reply gets routed back to our Gmail servers and shows up in your friend's Gmail chat window.