There doesn't seem to be a way to limit a smart collection to a collection or collection set. When I create a smart collection inside a collection set, my expectation was that it would apply the criteria to the parent collection set only. Instead, it filters the entire library, regardless of where the smart collection is located. This is really confusing to me, and apparently to others.
To give an example of why this is helpful, and why it is an expected behavior, here is a workflow I typically use: I load my images through Lightroom onto a drive. The folder name is just a date. I then use collection sets as the equivalent of a "Project" (I was an Aperture user for many years). Inside the collection set, I create collections of photos. Then, what I would want to do, is create a series of smart collections to, say show my TIFFs that I am editing in Photoshop, or have between 3 and 5 stars. I would expect this to be filtered to parent collection set, so that I could re-create those smart collections inside each collection set.
Now, yes, I can gain similar functionality via filters and such. But, that is another place I have to go, create and find a preset, etc. Not nearly as intuitive or convenient.