NY is definitely playing better ball since Lin became the starting PG. Adding J.R. Smith looks like it will be a plus move as well. And once Melo returns, they will absolutely have a dangerous lineup. I can definitely see NY moving up in the standings.
The thing is though, they still don't play very much defense. Smith and Melo have never been known as great defenders, niether has Amare and Lin doesn't look like much of a defender either. The other things is, there is only one ball for all the options they have on offense. Will it work? Probably yes, but it isn't garaunteed.
NY is a dangerous team, but they have a ways to go still.