**Update (9/22/2014)**
The best workaround I have found to initiate a SMS conversation is to start the conversation through gmail on your computer and it will automatically carry over to your iOS application. Not exactly handy when your on the go and need to send someone a message but you could always start conversations with your most popular contacts so that you will already have the conversation there.
Another issue I am seeing is you cannot add/edit someone as a contact. So, even if you have a friend in google hangouts with their phone number, the SMS messages still come in as the phone number and does not show the name of the contact nor recognize it as someone in your contacts and you cannot add/edit them into your contacts either.
This all falls back to the issue with initiating an SMS. Hangouts only looks for people in your hangouts to launch a hangouts conversation but there is no option to specify SMS on the iOS platform as there is on android or gmail.
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I just started playing with this so bear with me
Google has recently integrated Google Voice and Google hangouts so that you can send/receive SMS messages and send/receive phone calls for gmail and Android devices. Some instructions on enabling these new features can be found here:
https://support.google.com/voice/answer/6023920?hl=en
What google fails to mention is that this will also work with iOS devices. The only issue I have found so far is I cannot find a way to initiate an SMS/MMS conversation. Nope, someone else must first send me a message and then I can reply. Once the conversation is started you can always save it to your favorites so you wont lose it but this is just a workaround. If anyone knows how to send as SMS please comment below.
The advantage of using Google Hangouts, however, is having the ability to send pictures and other attachments and not just plain text. This was always my biggest complaint with the Google Voice app.
You can also use your google voice number with Hangouts to send/receive phone calls over data or Wifi. The call quality isn't always the best but it gets the job done.
So, if you want to try it out, all you need to do is follow the instructions for setting up Hangouts in Gmail and the settings will carry over to your
Google Hangouts iOS app.