Y'all are being pretty darned literal about this "knocking down the squiddies" thing.
Homie can fly. He's hooked up with machines on a deep, deep level. He's visited their core mainframe, interacted with the architect of the Matrix, and left some of his code there. It's beyond the physics that you and I know about here trapped in The Matrix (he he), but cut the guy some slack! He's <i>The One</i>, for crying out loud! Nobody in the movie knows what happened either--including Neo. Big mystery thing. That's what "the middle film of the trilogy" is all about.
I also don't get (yet) how this guy Bane is really Smith. Who said that? Did you infer that from Neo's dream about the Agent leaving the Matrix through a phone? I just got that he was a traitor guy who wanted to give Zion up for whatever personal deal he could work out, just like Cypher in the first movie.
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