If you're talking about Jinton, then yeah. That's what might kill Hiruzen if he can't avoid it in time. But if he's just attack a Hiruzen, he and the others are likely to smell him and then attack him with their elemental ninjutsu, which are sorta kinda large. They could just wait till Muu's right upon 'em.
Invisible Muu ='s Shadow Clones. Hell, it was even stated that Shadow Clones were his normal fighting style. If two scents come up, both get hit. For all Hiruzen knows, it's a clone or just to double check and be safe. No reason not to.
Is it steam or water molecules? Either way, doubt it really does. Not sure if Steam even has a definitive scent to mask it.