Harbaugh understood he wasn't going to keep up with the Jones' with a guy named Smith.
I do think Smith was / is a very serviceable QB and could take the right team deep (think Dilfer). But he landed in KC so I guess we will never know.
Smith picked up an injury and Kaepernick exploded in reserve, winning the job.
It wasn't a passing of the torch. Had Smith not got injured, he would've remained the starter. He was among the statistically best ranked QB's in the NFL last year. It's not his fault Kaepernick played the way he did.
With all respect, your post sounds like it was damage control written by Harbaugh's publicist. Smith got a concussion and Harbaugh, seeing the success of RW, RG3 and Newton, took advantage of Smith's injury and stayed with the (mobile) guy, his guy, that he drafted the year before.
Typically in the NFL, regardless of how the back-ups play, the starter usually won't lose his job because of (short-term) injury. You point out that Smith was playing great ball at the time of the injury and that really just bolsters my point: It wasn't the passing of the torch, it was get out of the way, Alex or I'll burn your house down.
BTW...not knocking anyone involved. It was (thus far) the right call by Harbaugh and Smith gets to get the hell out of SF. Win /Win.