troubleshooting smart switch installation
I think you hooked up neutral correctly. Stay away from the 3-way switch. 

Your assumption that cable 2 comes from the panel may be incorrect.  Mechanical switches are direction agnostic, they don't care which is supply-hot and which is switched-hot.  Smart switches do.  The switch needs supply hot on its (presumably) black.  Then, it will power up even without hooking up the red wire. 

So I would test the black wire to either one of the blacks coming in cable 1 or 2.  When the smart switch powers up and becomes recognizable, declare victory and hook the red wire to the other black.