As you have proven, many consumers still have a misperception about NADA guides and the Kelley Blue Book. Though the NADA is still the legislative voice for the industry, and although they still promote and garner substantial income from the NADA guides, dealers have't used them for years. Until recently the banks had a hard time of letting go of them because they had such conservative loan values. But consumers toting these books have been laughed at by dealership personnel since the late 70s. So when you walk in and say "I have an NADA guide and I know the values," that's like saying "I am a real dumba$$ and I own ocean-front property in Arizona."
But because there are millions of people (and a few hundred dealers) still loyal to the NADA brand, AutoTrader is just selling advertising, not endorsing the book.
You are quick to assume the guy was low-balling you, here are some counter-points:
1. When a dealer is selling a new car and he knows you can buy the same exact model from 10 different dealerships, they will shoot you a low price on the new car to be competitive, but then "hold" or bid less on the trade, which gives him a way to make back some margin later.
2. The book is just a guide, and people like Khan Smith always think there trade-in is worth more than it really is. Always. You expect him to give you max dollars, but for all you know, he just had to dump one just like it at auction for a $200 loss. And people think smoking in cars doesn't cost on resale?? Its costs between $500-1000 right here on the spot. Guaranteed.
3. Or while you might revere your trade, he might have seen 4 of them just like it go unsold at the auction and that data hasn't hit the book yet.
There are so many scenarios with these deals....you just need to use eBay and the BB and shop around. Through that process you will be more informed, then you can settle on a deal that suits you.