It is my understanding that this was the cause of a forced landing by a Varig Boeing 707 short of one of the paris airports some years back ,the aircraft burnt out and a number of the pax died.
http://aviation-safety.net/database/1973/730711-0.htm
116 out of 117 passengers perished. 10 crew survived, something upon which I will not comment.
Although cause of the fire was never established, the source was identified as the 'washbasin unit'. The above report states the crew were unable to locate the fire prior to the crash. While a discarded cigarette is a possibility, that was not the definitive conclusion.
To separate fact from folklore, no airliner loss has ever been attributed to careless smoking. There have been a number of unexplained in-flight fires (notably a Viscount in Maryland), any one of which might have been started by a cigarette. Or any one of a number of different causes.
Yes, I smoke. If you wish to flame me for that reason, feel free. I do not smoke in airplanes or anywhere else prohibited by law. Whatever one's feelings on the subject, it ought to be possible to express them free from emotion or hysteria.