Smith was in one of the most critical roles on the Ship. All the reports came to him: The engineers, the flooding reports, the wireless messages, the ship's designer. He knew exactly what was happening in its totality, and how the next 2 hours were going to play out. He understood things nobody else would know about for 70 years.
At the same time, we know almost nothing about what he did or said. He, and those closest to him - Wilde and Murdoch - all died. Many of those who did interact with him were either focused on other things, or tell wildly made-up folk tales about him. We really don't know much about his role in the sinking, even though it was one of the most important.
J. Cameron's 1997 movie was an entertainment. He was telling a story. The story was about the hubris and oppression of 1912 Gilded Age society. Capt. Smith was a blank canvas upon which he could write a message, so he did. You'll notice there aren't any good or heroic upper class passengers (upper society) or crew (hopelessly inured reactionaries both oppressed by and supporting the system). Now before you go picking examples of "good" 1st class passengers from the movie, let's look at some...
Margaret Brown - she's really the only good rich person on the boat. But she was also a working-class nouveau-riche who made her fortune doing manual labor (so in that sense she was a 3rd class passenger from a story-telling standpoint). Also, Cameron's movie doesn't make her into lifeboat hero "Unsinkable Molly Brown", she just cows down and shuts up when told.
Thomas Andrews- nice polite gentleman (also, not really "rich" either), but an enabler and supporter of the system. Ignorant of the oppression around him, even doing its bidding. Friendly toward Rose, but perpetuating the system which traps her.
Gracie - more or less an ignorant buffoon.
Astor - clueless and distant "oh yes, the Chippawa Falls Dawsons"
Lightoller - cowardly and out of his depth.
Strausses - play only a backdrop role in the movie.
Basically all the truly good heroic people in the movie were either 1. Rose or 2. Died.
Cameron told a story where the ignorance, pride, and exploitation of the rich sank society. I'm not getting into a political argument with the director, I'm just saying he went in a very cohesive artistic direction. There wasn't any nuance or "well on the other hand". I think Avatar was a trashy spectacle, also very cohesive and mind-numbingly predictable, but boy did the boxoffice love it. The man knows his audience.
So the role he chose for Smith (and given his overall artistic direction, I think it worked very well for him - even brilliantly) was the soggy marshmallow that just goes along with the system. Smith just sponges in to the cunning and grasping Ismay, then at the end he's utterly shocked at the disaster. I think the actual witness testimony indicates that Smith was very involved and aware of what was going on, but history doesn't record his every word, and Cameron uses him as a great polemic against people who stay on the sidelines instead of actively fighting for whatever cause.
Total fiction but look at the man's boxoffice receipts. And who doesn't love the proud captain, brought to his undoing, standing at the wheel of a sinking ship, continuing to steer it's useless rudder in horror along the same path as the glass cracks, announcing the arrival of inexorable doom... yes, I, even I have done this thing.
I think it works exceptionally well in Cameron's movie. Smith's actor (Bernard Hill) does an amazing job of artistically showing the changeover from "My, what a fine teaparty" to "My God, what have we done?!".
