»MY ULTIMATE GRAND THEORY BABY! (u won't be disspointed)«

you're going too deep on why smith wasn't destroyed when smith killed neo in M1. The reason that smith didn't die was because Neo inevitably had to come back to life. his purpose was yet to be fulfilled. every one of his predacessors had met with the architect. Neo was one of the ones, erego, he had to meet with the architect. but if he had died, then he would not have been able to meet with the architect, and then the whole foundation of all the matrixs would have crashed, so he could not have died yet.

Great theory, and well thought out.
However, the only problem is that Smith is not meant to destroy Neo.
Neo as the one is supposed to return to Zion and rebuild it after its destruction, repopulating it with several people chosen from the Matrix. The anomolay is controlled through this action.
Two things upset the equation though, first of all Neo refuses the Zion path and instead chooses to save Trinity, thus being a rebel rather than fulfilling his function. Secondly, Smith goes on his little cloning spree causing chaos, something else the matrix did not account for. Looking back, we can see this in Smith through his actions in matrix 1, his converstaion with Morpheous about getting out of the matrix and the removal of his earpiece.
In other words, both Smith and Neo act in defiance of the system that created them and this brings about the "Revolution" and the seeming end to the war.