Detroit waived Smith using the "Stretch" provision so that he'd no longer count against the salary cap.
Since you enjoy me being detail-oriented...
The stretch provision is the standard (and only, now that amnesty is off the table) method for waiving players. If a player is waived during the season, the only season that is not stretched is the current season - all other seasons must be stretched. While amnesty removed the player's contract from the salary cap calculations, the stretch provision does not, so Smith will count against Detroit's cap at a $5.4M for the next five years.
If he DOES sign a deal then what Detroit owes him will be reduced by half of what his new contract pays. So if he signed for the veteran's minimum (just under $1.5 million since he has 10+ years of NBA experience) then Detroit would pay $5.4 million - $750,000($1.5 million divided by two) = $4.65 million plus the $1.5M from his new team makes $6.15M
A $4M deal would mean $5.4M - $2M + $4M = $7.4M
A $6M deal would mean $5.4M - $3M + $6M = $8.4M
You missed one detail on the "set-off", which is that the waiving team (Detroit) only gets to set-off 50% of the salary above a one-year minimum salary ($845K this year). The calculation should look like this:
A $4M deal would mean $5.4M
(Detroit) +$4M
(new team) - (($4M-$845K)/2)
(Detroit offset) = $7.8M
A $6M deal would mean $5.4M
(Detroit) +$6M
(new team) - (($6M-$845K)/2)
(Detroit offset) = $8.8M
Capt. Factorial would have to weigh in here and correct me but I'm not sure I see another way Morris could be attained. There were rumblings that the Philly deal would create a trade exception but I'm not sure that's the case.
You're right, there's not going to be any trade exception left over because we will have to renounce any that gets created. If we wanted Markieff (and with his current legal troubles I'm not sure that's a good play right now) we would have to trade something of actual value to get him. Without looking at salaries, I would guess we'd have to part with at least Collison, maybe Collison+Ben to get him. We don't have a lot of trade assets right now, because once you take Cousins and Gay off the board, we have Collison, McLemore, and three min-value contracts. We can't trade the guys we just signed until later in the season.