You have to be on throttle for the blip downshifts. It will not blip on downshifts without your foot on the gas. That's the way it works. SMG figures if your foot is off the gas, you are slowing down and there is no need to blip the gas.
Try cruising in S5 at about 40mph in 3rd gear.Then start to accelerate by just just using the throttle. While keeping your foot into it, downshift to 2nd....you will get a perfect blip and the car will shift smoothly.