Perhaps I can clarify a few points that are often misunderstood.
The addition of "A Yaqui Way of Knowledge" to the title of the book was a move made by the publisher and quite lamented by Carlos, if you read carefully he never says that the teachings Don Juan gave him were Yaqui in origin, he says Don Juan was a Yaqui indian who had learned the ancient ways of the shamans of Mexico from his benefactor.
(Source: Authors commentary in the
30th anniversary edition of the "The Teachings of Don Juan")
Supposedly the original field notes from his anthropological work were destroyed (I forget if it was in a fire or a flood?). No one can really corroborate fully where Carlos came up with all that stuff, it's a bit of a mystery. I do suspect as Jamie said that Don Juan is a fictional character and the teachings were pieced together from a variety of sources with little authentic anthropological field work, but the fact of the matter is we don't know for sure and we likely never will.
(Source: Documentary(s) on Castaneda, IIRC it was the Enigma of a Sorcer one)
The majority of the teachings do seem to based on Toltec wisdom, which in itself seems to have some very convoluted and hard to identify origins. I think it is very likely Carlos was exposed to Toltec teachings at some point. I disagree with the assessment of his delivery of these teachings being theft because he wove them into a nice fictional novel.
(Source: The little other information I've found on Toltec wisdom, mostly the work of Don Miguel Ruiz)
When Carlos goes to the desert where "Mescalito" lives he goes to visit Don Juan's friend who is a Tarahumara Indian and his wife in the northern part of Chihuaha before they set off, it's also on this trip and in this area that he gathers the mushrooms for the little smoke. Again there are clear distinctions made in the book that these practices are not Yaqui in origin and the knowledge presented draws from the many traditional practices from around Mexico.
(Source: The Teachings of Don Juan pg 69)
The active ingredient of the little smoke is listed to be Psilocybe mexicana. The little smoke has been a topic of quite some debate since it's rather well accepted that smoking mushrooms does not yield hallucinogenic effects. Perhaps it had something to do with the other plants in the mixture? We have a few keys on this, he says that the smoke consisted of the mushrooms plus five other plants "none of which was known to have hallucinogenic properties"(a plant with yellow flowers, sage, and tobacco are all hinted at). He also makes note of the fact that he was not only inhaling but ingesting the mixture.
"The manipulatory technique for the fourth specific purpose utilized a smoking mixture made of dried mushrooms [psilocybe mexicana] mixed with different parts of five other plants, none of which was known to have hallucinogenic properties. The rule placed the emphasis on the act of inhaling the smoke from the mixture; the teacher thus used the word humito (little smoke) to refer to the ally contained in it. But I have called this process "ingestion-inhalation" because it was a combination of ingesting first and then of inhaling. The mushrooms, because of their softness, dried into a very fine dust which was rather difficult to burn. The other ingredients turned into shreds upon drying. These shreds were incinerated in the pipe bowl while the mushroom powder, which did not burn so easily, was drawn into the mouth and ingested. Logically, the quantity of dried mushrooms ingested was larger than the quantity of shreds burned and inhaled."
(Source: The Teachings of Don Juan pg 175-176)
I still think the descriptions of the little smoke sound uncannily like dmt or salvia, and since it's listed to contain both psilocybin mushrooms and some type of "sage", I am inclined to ponder if perhaps there is not some bit of truth at the heart of the matter.
All in all, the way Castaneda lived was not certainly not in line with the model of the impeccable warrior he presented in his books. There is a lot of mystery and controversy surrounding the man and his books and we'll likely never know the truth of the matter.
The first book is a fantastic read and has had a huge influence in the lives of many many people over the years. The quality of his books seemed to diminish the more of them he wrote and later books tend to contradict the earlier ones, however there is still a lot of pertinent information to be gained from his work as others here have pointed out.
Controversy aside, it is a very important book in American literature and has had a huge impact on our culture over the last four decades or so. It may have been presented under false pretenses but it's very well written and definitely worth the read, imo.