Moobie, you're definately on the right track I believe.
Notice that the oracle has, at least some tiny bit of control over body, even though she is "a Smith".
"Everything that has a beginning, has an end....I mean... what did I just say!?"
So when Neo allowed himself to be taken over by Smith, a similar thing happened....EXCEPT, Neo was jacked directly into the "uber-machine" (didn't catch its name if there was one), so that meant Smith was also directly attached to the machine, alowing them to do some anti-virus magic, and get rid of Smith and all of the others.
At leats thats how I understood it.
Anyone come up with a reasonable theory for why EMPs weren't scattered liberally around Zion?
EDIT: changed "were" to "weren't"