A native speaker would/could use both but 1 is better. I wish you would stop smoking sounds correct. I wish you stopped smoking sounds a little weird but some people would'nt notice it as being so.

Both are correct. The only difference, really, is that #1 comes across as an even more polite way of asking someone to stop smoking.

"I wish you would stop smoking." You are smoking now or are in the habit of smoking regularly and I wish you would stop. "I wish you stopped smoking." You were a smoker until your 60's and I wish you [had] stopped smoking earlier.