Its sort of requires the suspension of belief

but if a virus like smith can effect someone's conscious on the real world

you have to believe that neo is so connected to the matrix that he can effect machines in the real world just the same maybe that is why he is truly the "one"

SO smith being an anomaly a virus he is the only real threat to everything because he is an errant program that duplicates so it cant be stopped except by the one who is in effect an anomaly

kinda cool how humans and computer mimic each other

I really liked everything happening on two levels like when you watch them talk they aren't just talking they are programs running scripts in that aspect I think the W brother deliver a great film I was not disappointed at all I'm going to see it again