Herve and the Tech III guys are no fools. Most of his calls have been pretty good ones through the years (OK maybe not Toseland). I am sure they are ok with Smith being there. With such limited seats, and the dollars involved if Tech II or Yamaha thought he was a liability he wouldn't be there, contract or no contract.
Their Moto2 bike is a backmarker and I think they know it, so they are not looking at results, versus ability and how he works with the team. I think he will be one of those who doesn't crash this year, finishes near the CRT's but picks it up as the year goes on a bit. The following year he will find some more speed and fight the other satellite riders for mid prototype positions.
"Remember that an enduro tests the endurance of three things: your machine, your body, and your wits. Only one has to fail to keep you from reaching the finish line." Cycle World March 1966