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I'm throwing my lot in with the employer on this one. Every employer has the right, I think, to choose what risks to take and what costs to cut. If he realizes that he has to pay higher insurance premiums for smokers than for nonsmokers, and if nonsmokers can get the job done just as well, why not hire nonsmokers and fire smokers?
A possibly awful parallel: An employer sees two applicants, one with a degree in the field he will be employed in, one with a degree in something totally random. It will cost less and take less time to train the first applicant in the job, so the employer will more likely pick him. The second applicant has just as much right to the job, and may do it just as capably, but he will cost more, so why spend more money than you have to? Besides, smoking is voluntary (obesity is debatably so); smoking is a lifestyle choice. It's something a person can change, and if they really want to, they will. If they don't want the job badly enough to quit, thier loss. I don't see the fault, really.
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