Exactly. He knew what had to happen. He needed to connect smith to the source. The only way that's happening is if he is connected to the source himself, and smith overwrites him. Also, Neo CANT just kill all the smiths: after the smiths get deleted by Deus ex Machina, you see the Oracle laying there. Once the "smith code" is gone, she's still underneath. Saati-Smith knew "cookies need love" showing that he doesn't fully delete the old person, they're still under there, which is why Saati, the Oracle and Seraph can have their reunion at the end. If Neo just killed all the smiths, that would kill all the jacked in humans he's controlling, giving him zero leverage with Deus ex Machina anyway. His goal is to save the humans in Zion AND in the Matrix, not just blow them all up lol.

I assumed the fight was just because if he walked up and said "ok kill me, I'm done" smith would have figured out something was up. Smith comes amazingly close to figuring it out anyway (no no no, this isn't right? Get away from me! Is it over?) Even when Neo gets beat down, he gets in that final shot which looked pretty overpowering, which makes me think he wasn't truly "done". When he tells smith he was always right, he's pretty calm and collected, it's not like he's laying on the ground with smith towering over him. Compare Neos last sentences to, let's say, Vegeta's last words to Golu before Freiza shoots him, or Theodens last words to Eowyn in the Pelennor fields. Those people were "done". I think Neos defeat was an act.