You do want to soak both the grain and the wood prior to smoking. Wet wood smokes more than dry wood and wet grain will absorb smoke. Dry grain will just darken and get roasty. You can experiment with smoking with different woods but beechwood is the common wood for rauchmalt.
Smoke and hops generally do not go together because the bitterness from the smoke and the bitterness from the hops do not blend in a way that enhances either flavor. That said, I make a traditional smoked wheat beer (gratzer/grodziski) that is smoked over oak and hopped to 35 IBU. It's really good and the smoke and hops do blend well, but I think the smoke flavor from the oak is very different than the bacon-y smoke flavor from beechwood.