you can't do it. The gear relies on notifications from the phone.
1. if you turn off hangouts notifications for SMS, then you can get SMS client notifications, but you won't get hangouts for SMS on the phone
2. if you turn off SMS client notifications on the phone, then the Gear will never know to display the notification.
3. You could have hangouts AND the SMS client enabled on the phone, and only the SMS Client notifications enabled on the Gear, but then you'll have duplicate notifications on the phone, and you won't receive any non SMS hangouts notifications.
you can't win