Update: I have written an additional blog entry on this topic to address both Service Requests and Release Records. This post can be found here: Notification workflow on Work Item assignments (Part 2)
The Microsoft Service Manager team has written two great blogs on how to create the workflows required in Service Manager to send out notifications when a work item has been assigned/re-assigned. Initially you might think this could be done in the UI, but actually it must be done in XML. The Service Manager team has provided great examples on how to do this for both Incidents and Activities.
The blog for Incidents can be found here:
The blog for Activities can be found here:
I followed the blogs above and got it working in no time for both my Incidents and Activities. However, I also wanted to do this for my Problems and Change Requests.