Using the large holes of a grater shred the potatoes and onion onto a clean dish towel. Twist towel around potatoes and onion to extract as much liquid as possible.
Transfer the mixture to a bowl. Add the egg, flour, baking powder, salt and pepper. Stir with a fork until well blended.
Heat about 1/4 inch of canola oil in a large, heavy skillet until it ripples. With a metal tablespoon, carefully place a spoonful of the mixture into the hot oil. Press down with a spatula to form an evenly thick pancake about 2 inches in diameter. Add more spoonfuls, taking care not to overcrowd the skillet. Cook the latkes until golden brown, 2 to 3 minutes per side, turning them over carefully with a metal spatula. Transfer to a platter lined with paper towels to drain. Continue with the remaining mixture. If not serving immediately, allow to cool completely. When ready to serve, preheat the oven to 400 degrees F. Place the potatoes on a baking sheet and heat in the oven until crisp, about 10 minutes.
Meanwhile, in a small bowl, stir together the dill and crème fraîche. Season to taste with lemon juice, salt and pepper.
To serve, transfer the hot potato latkes to a platter. Spoon a small dollop of the crème fraîche mixture onto each latke and top with flakes of smoked salmon. Serve immediately.