The following relates to "hot" smoking, where the sausage is fully cooked when you're finished. I have no experience cold smoking and can't speak to how the results from the two methods are different.The most likely culprit for tough casings on a smoked sausage is that the sausage was left to dry too long prior to smoking. Even 2 hours in the fridge can be enough to see a difference if the sausage is left uncovered.
I have the best luck wiping the sausage down with paper towels to remove any excess moisture, letting sit in the smoker at low heat (about 80 deg. F) with no smoke until the casings are dry to the touch and then smoking away as normal.
As for how long to smoke? For a mild smoke flavor I'd say 2 hours is fine. For stronger, then 6+ hours might be good. Of course the trick is to ensure that your sausage doesn't finish cooking before you're finished smoking
So monitoring the temperature inside the smoker as well as the internal temperature of the sausage is important. Choice of wood can impact these times too, although not too much.
For the longer smokes I try to hold the smoker temperature around 110 - 130 deg. F while smoking. When I'm ready to finish cooking I'll adjust to have a smoker temp of 170-190 deg. F until the sausage hits the desired internal temperature. Then remove from the smoker and place the sausage straight into a cold water bath. [/i]