I'm not sure that's what would have actually happened, but even if it was, the way it played out there's no way he doesn't start after Smith's contract expires. Ithink it was the GM saying to the fans that Mahomes is going to be the franchise QB going forward. The guy has basically unlimited ceiling (he can chuck it 50 yards in the air throwing off his back foot on the run, who else can do that?), and complaints about Alex Smith have been circulating for a couple seasons.
I think he does just fine, personally, even if the three dozen screens per game is really frustrating to watch.
Mahomes isn't going to be the screen guy. He'll be fun to watch even if he goes up in flames.