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Question: Did Joseph Smith set up a bar to sell liquor in Nauvoo?
Question: Did Joseph Smith set up a bar to sell liquor in Nauvoo?
The Word of Wisdom was not binding on Latter-day Saint members, and was certainly not seen as a requirement for non-members
Joseph's hotel would likely see many travelers who would be non-members, and he may have felt that his supervision would be better able to prevent the abuse and trouble which liquor often brought with it. Despite this, he seems to have gradually decided that the Mormons could not or should not impose their views on abstinence on the entire city and its population.
Emma's concern, notably, does not have anything to do with the Word of Wisdom, but simply that she does not wish her children and home to be associated with the difficulties that came with the liquor trade, and that it looks bad for any religious leader to be in any way associated with something as disreputable as liquor.
Critics count on "presentism"—they hope readers will judge historical figures by the standards of our day, instead of their day.
The Word of Wisdom was enforced differently in the 19th century than today. It was not the strict test of fellowships that it is for the modern member.
Drink was often viewed as a scourge on the nineteenth century frontier
Mayor John C. Bennett's inaugural address sounded this theme:
The 21st Sec. of the addenda to the 13th Sec. of the City Charter concedes to you plenary power "to tax, restrain, prohibit and suppress, tippling houses, dram-shops," etc. etc., and I now recommend, in the strongest possible terms, that you take prompt, strong, and decisive measures to "prohibit and suppress" all such establishments. It is true you have the power "to tax," or license and tolerate, them, and thus add to the city finances; but I consider it much better to raise revenue by an ad valorem tax on the property of sober men, than by licensing dram shops, or taxing the signs of the inebriated worshippers at the shrine of Bacchus. The revels of bacchanalians in the houses of blasphemy and noise will always prove a disgrace to a moral people. Public sentiment will do much to suppress the vice of intemperance, and its concomitant evil results: but ample experience has incontrovertibly proven that it cannot do all -- the law must be brought to the rescue, and an effective prohibitory ordinance enacted. This cannot be done at a better time than at the present. Let us commence correctly, and the great work of reform, at least so far as our peaceful city is concerned, can be summarily consummated. It would be difficult to calculate the vast amount of civil and crime that would be prevented, and the great good that would accrue to the public at large by fostering the cause of temperance; but suffice it to say that the one would be commensurate to the other. -- No sales of spirituous liquors whatever, in a less quantity than a quart, except in cases of sickness on the recommendation of a physician or surgeon duly accredited by the Chancellor and Regents of the University, should be tolerated. The liberty of selling the intoxicating cup is a false liberty -- it enslaves, degrades, destroys, and wretchedness and want are attendant on every step.... 
Soon after the Nauvoo charter came into effect, Joseph and the city council "passed an ordinance against vending whiskey in small quantities, effectively restricting the opening of saloons." 
It seems this prohibition did not apply to wine
On 12 July 1841, Joseph "was in the City Council, and moved that any person in the City of Nauvoo be at liberty to sell vinous [i.e., of the vine—wine] liquors in any quantity, subject to the city ordinances." 
As one historian of Nauvoo noted:
Although Nauvoo was a city of temperate or abstinent Saints, it was also a burgeoning western river town. Doubtless most of its gentiles and many Mormons did not hold prohibitionist views, and the demand for alcohol in its various forms must have been more or less constant. Such pressure is evident in the gradual relaxation of the official attitude toward liquor....
There was apparently never any prohibition on the sale of beer and ale, and on April 9, 1842, the council acted to license taverns and ordinaries in the town to sell beer but not spirits. But on May 14, [Joseph] Smith recorded, "I attended city council in the morning, and…spoke at length for the repeal of the ordinance…licensing merchants, hawkers, taverns, and ordinaries, desiring that this might be a free people, and enjoy equal rights and privileges, and the ordinances were repealed." 
On 12 December 1843, the city council in Nauvoo passed a law allowing the mayor (i.e., Joseph) to sell spirits:
Be it ordained by the City Council of Nauvoo, that the Mayor of the city be and is hereby authorized to sell or give spirits of any quantity as he in his wisdom shall judge to be for the health and comfort, or convenience of such travelers or other persons as shall visit his house from time to time. 
We note that such sale can include for "health"—some alcoholic use was seen as medicinal. (To learn more about medical beliefs and the Word of Wisdom substances, see here.)
The complete restriction on liquor sales was further relaxed on 16 January 1844, though liquor is still viewed with disapproval:
Whereas, the use and sale of distilled and fermented liquors for all purposes of beverage and drink by persons in health are viewed by this City Council with unqualified disapprobation:
Whereas, nevertheless the aforesaid liquors are considered highly beneficial for medical and mechanical purposes, and may be safely employed for such uses, under the counsel of discreet persons: Therefore,
Sect. 1. Be it ordained by the City Council of the city of Nauvoo. that the Mayor of this city is hereby authorized to sell said liquors in such quantities as he may deem expedient.
Sect. 2. Be it further ordained, that other persons not exceeding one to each ward of the city, may also sell said liquors in like quantities for medical and mechanical purposes by obtaining a license of the Mayor of the city. The above ordinance to be in full force and effect immediately after its passage,—all ordinances to the contrary notwithstanding. 
A bar for travelers was set up in Joseph's hotel, the Mansion house, and Emma rejected it due to the type of people it might draw
Joseph Smith III tells of Emma's return from a journey to find the bar in place. As her biographers tell the story:
...Emma entered the main room of the Mansion House on April 24 [, 1843]. A bar, complete with counter, shelves, and glasses for serving liquor stood in the room. [Orin] Porter Rockwell reigned supreme over it. Emma sent her eleven-year-old son into a meeting to tell Joseph she wished to speak with him; she waited in the hall.
"Joseph, what is the meaning of that bar in this house?" Emma asked with restraint obvious to her young son, who later recorded the confrontation. Joseph explained that a new building across the street was planned for Porter Rockwell's bar and barbershop, but until it could be completed Rockwell had set up the bar in the Mansion. "How does it look for the spiritual head of a religious body to be keeping a hotel in which a room is fitted out as a liquor-selling establishment?" she asked earnestly. Joseph countered that all hotels had their bars, the arrangement was only temporary, and he wanted to make up for Rockwell's months in prison. 
Rockwell had been jailed for months, and reached Nauvoo in financially desperate straits. Joseph hoped to find a trade for his old friend and bodyguard.
Emma was not persuaded by this argument:
Unconvinced, Emma told Joseph he could hire someone to run the Mansion for him. "As for me," she continued, "I will take my children and go across to the old house and stay there, for I will not have them raised up under such conditions as this arrangement imposes upon us, nor have them mingle with the kind of men who frequent such a place. You are at liberty to make your choice; either that bar goes out of the house, or we will!"...
Joseph answered, "Very well, Emma; I will have it removed at once." Soon a frame structure, designed to house the bar and barbershop, began to rise across the street. 
- John C. Bennett, "Inaugural Address. City of Nauvoo, Illinois, Feb. 3rd 1841," Times and Seasons 2 no. 8 (15 February 1841), 316. off-site GospeLink (requires subscrip.) See also History of the Church, 4:288. Volume 4 link
- Richard L. Bushman, Joseph Smith: Rough Stone Rolling (New York: Knopf, 2005), 413. See Anonymous, "Great Moral Victory!," Times and Seasons 2 no. 8 (15 February 1841), 321. off-site GospeLink (requires subscrip.) See also later law, which read: "That no auctioneer or auctioneers shall sell by auction dry goods or groceries, in lots or parcels of less value than five dollars, or liquors of any kind in less quantities than five gallons...." - Anonymous, "An Ordinance Regulating Actions, in the City of Nauvoo," Times and Seasons 3 no. 9 (1 March 1842), 717. off-site GospeLink (requires subscrip.) Still later, "That all keepers of ordinaries or taverns, shall be, and they are hereby prohibited from selling spirituous liquors; and any keeper of a tavern or ordinary, who shall sell or permit to be sold, any spiritous liquors, in violation of this prohibition, shall, on conviction, for the first offence, be fined in the sum of twenty dollars, and for the second offence, forfeit his license, which shall be annulled by the Mayor...." - Anonymous, "An Ordinance to regulate Taverns and Ordinaries, in the City of Nauvoo," Times and Seasons 3 no. 12 (15 April 1842), 766. off-site GospeLink (requires subscrip.)
- History of the Church, 4:383. Volume 4 link
- Robert Bruce Flanders, Nauvoo: Kingdom on the Mississippi (Urbana and Chicago: University of Illinois Press, 1965), 246.
- History of the Church, 6:111. Volume 6 link
- History of the Church, 6:178–179. Volume 6 link
- Linda King Newell and Valeen Tippetts Avery, Mormon Enigma: Emma Hale Smith, 2nd edition, (Urbana and Chicago: University of Illinois Press, 1994), 178–179. citing Joseph Smith III, Joseph Smith III and the Restoration, edited by Mary Audentia Smith Anderson (Independence, Missouri: Herald House, 1952), 74–75.
- Linda King Newell and Valeen Tippetts Avery, Mormon Enigma: Emma Hale Smith, 2nd edition, (Urbana and Chicago: University of Illinois Press, 1994), 179.