If you are not using "batchnodes" for your breakout game, you should be. I found that batching your sprites together, so that they are drawn in one call, can make huge improvements in frame rate and the smoothness of sprite movement on screen.
If I was making a breakout game, I would make each brick an instance object of a brick class, and add each brick object's sprite to a batchnode. You can even add the ball to the same batchnode. Use a sprite sheet for all your graphic images.
In my experience, you should get smooth animation updating the ball position after doing this, with an interval update based on the delta time like you mentioned. Only issue with this is if anything loads the CPU outside of your program, like bringing up the volume adjustment on screen, you will see a temporary small drop in frame rate.
This is supposed to be rectified by using a "fixed time rate" for your update. I currently do not know how to properly incorporate the "fixed time rate" technique, and have not used it in my games.
I assume games like "Cut the Rope" must use this. When I play cut the rope, NOTHING seems to ever alter or drop the frame rate, not even adjusting the device's volume controls. The animation movement in Cut the Rope is as smooth as I have ever seen on an iOS device. The game is rock solid, the frame rate never seeming to drop or change at all. I would like to know how they achieved it..
