In Detroit, Smith is in the wrong "system", if you could call ex-coach Mo Cheeks' strategies a "system". More to the point, he has been playing out of position. He's a PF, and is most effective there both offensively and defensively.
Is your plan to start Sullinger at center, bring Sullinger off the bench, bring Smith of the bench, or use Sullinger as trade bait?
My plan would be to use Sullinger as trade bait.
Despite Sullinger's young age, I still believe Smith has more upside. Smith's only real limitation is mental - his actually talent level is through the roof. There is always the odd chance that in the right organisation something could click, and his mentality could change.
The NBA has had more than it's share of such stories. Zach Randolf. Andre Blatch. Jordan Crawford (still a chucker, but does seem to have matured a ton as a person), Terrence Williams (as per Craword), Demarcus Cousins, etc.
Smith is a guy who could come in and give you 35 minutes a night at the PF spot, no problems at all. Sully lacks the conditioning to offer that, so as long as Sully is your starting PF you are always going to have to invest a lot of money in a very solid backup PF...because that backup PF is going to be giving you a good 20 minutes or so per night.
I have more faith in Smith improving his mentality than I have in Sully improving his conditioning and becoming even an average NBA athlete. I also believe that Sully's mentality is overrated here...he's not exactly the shining white knight that he's labbeled as on CB. He's already got his share of dark shadows surrounding his personality - there's the frequent fragrant fouls, the fact that he's foul prone, the domestic violence case (no matter what you believe the reality is) and the fact that his dad needed to give him a yelling to snap him out of a lazy streak that he himself admittedly he had fallen in to.
If there are any player's on this team who have the absolute perfect attitude / mentality it's Avery Bradley and Kris Humphreys. Actually Olynyk seems like he has his head on right too.
Sully's attitude may not be as big a problem as Smith, but he's still far from perfect in that regard.
I'd take a gamble on Josh Smith.
Lets put it this way
1) We owe Jeff Green $9M/year over three years (including this year). Josh Smith is owed $13M over four years (including this year).
2) Jeff Green is not a #1 scorer type guy, and even calling him a #2 scorer is a stretch. It really looks like 16 PPG is the ceiling for Green. Smith is also not a #1 option, but he's generally a 17 PPG - 18 PPG guy. In terms of scoring production that is a slight improvement over Green. Green is a better three point shooter, but then Smith is a better post scorer. Green is a better free throw shooter. Green overall is probably more versatile offensively, but Smith tends to put up more points...about equal here.
3) Everybody complains here that Green is inconsistent and not driven enough. Same with Smith. No disadvantage here.
4) Everybody complains here that Green is a poor passer. Smith is one of the best passing big men in the league - probably top 5 in that regard. Big benefit to Smith here.
5) Everybody complains that Green is a poor rebounder for his position. Smith is a well above average rebounder (typically around 8-9 RPG over his career). Big benefit to Smith here.
6) People complain that Green cannot defend PF's, can't protect the rim, and has poor ball handling skills. Smith is much better equipped in all three of these areas, especially shotblocking - he's been a very good shot blocker throughout his career.
So Smith is basically better than Green in every single aspect of the game except attitude and offensive - in both of these categories both players have their strengths and weaknesses.
Considering you are only paying $4M extra for Smith, and you're only locked in one year longer...and you are getting a player who is better in almost every way. Even if he never improves and remains the palyer he is, you'd still do it. If he does change his mindset and sees even a portion of his potential, then this would end up one of the most lopsided trades in the past decade.
Plus contract or no contract, I still believe Smith has more trade value than Green does.